Outsourcing of Cash Management Services and Performance of Commercial Banks in Kenya

Abstract

The study sought to investigate the effect of outsourcing of cash management and handling services on performance of commercial banks in Kenya and to establish the challenges of outsourcing of cash management and handling services by commercial banks in Kenya. The study was guided by three theories; the resource based theory, transaction cost theory and the agency theory. The study adopted a descriptive research methodology and conducted a census on 43 commercial banks that are licensed to operate in Kenya. Data was collected with the aid of questionnaires presented to the respondents who were employees of the commercial banks. Data was analyzed using software, a regression model fitted and the relationship between the independent and dependent variables shown by the co-efficient of correlation. The mean and standard deviation were used to measure the central tendency and dispersion. The study concluded there is a positive strong relationship between performance and the independent variables as shown by the Pearson’s co-efficient correlation which is significant as indicated by the P-value at 95% level of confidence. 66.5% of variations of changes in the dependent variable can be explained by variations in the independent variables which were cash management services, ATM handling services and cash centre management. The study concluded that Performance of commercial banks is affected by the decision to outsource cash management and handling services, cash centre management and ATM management operations. .