Effect of non-interest income on profitability of commercial banks in Kenya

Abstract

Non-interest income is seen an extra source of income for commercial banks which is essential to enhance profitability of commercial banks in Kenya. The study sought to determine the effect of non-interest income on profitability of commercial banks in Kenya. To achieve this objective the study used a descriptive survey. The population of the study constituted all the 43 commercial banks in Kenya. The data was gathered from financial statements and records. Data analysis was done using a regression model. The study found that non-interest income was positively related to profitability of commercial banks. Bank size and liquidity were also found to be statistically significant since their p-values were less than 5%. The correlation results were found there was a moderate correlation between Non-interest income and profitability of commercial banks. The study recommends that firms should offset the risk of doing business. The limitation of this study is that it used financial statements which do not give a complete picture of the activities and projection of commercial banks profitability because the financial statements are historical in nature and might not necessary reflect the actual needs of the researcher this might have affected the validity and reliability of data and thus impact negatively on the findings obtained.