Effect of Operational Efficiency and Credit Size on Financial Stability of Commercial Banks in Kenya

PDF

Published: 2023-01-15

Page: 31-39


Mary Ndinda *

KCA University, Kenya.

Antony Mwai

KCA University, Kenya.

*Author to whom correspondence should be addressed.


Abstract

This research sought to establish the effect of operational efficiency and credit size on financial stability of commercial banks in Kenya. The paper is an extraction from the Masters research of the first author. The study found that operational efficiency has no significant effect on financial stability of commercial banks in Kenya. It was established that credit size has significant effect on financial stability of commercial banks in Kenya. It was recommended that lending activities should be done with caution. Proper credit risk management system should be put in place which will help in assessing the credit worthiness of borrowers, analyze their repayment capabilities while also monitoring the progress of projects which loans were collected for. The study is of the suggestion that additional empirical researches can be done on listed commercial banks as well as non listed commercial banks in Kenya. This will provide basis for having comparisons of the effect of operational efficiency and credit size on financial stability of commercial banks in Kenya.

Keywords: Operational efficiency, credit size, financial stability, commercial banks in Kenya


How to Cite

Ndinda, M., & Mwai, A. (2023). Effect of Operational Efficiency and Credit Size on Financial Stability of Commercial Banks in Kenya. Asian Journal of Economics, Finance and Management, 5(1), 31–39. Retrieved from https://globalpresshub.com/index.php/AJEFM/article/view/1761

Downloads

Download data is not yet available.

References

Hasanovic E, Latic T. The determinants of excess liquidity in the banking sector of Bosnia and Herzegovina. Working Paper No. HEIDWP11-2017. Accounting. 2017; 11(5):1-11.

Dembel MB. Factors Affecting the Performance of Commercial Banks (A Case Study on Commercial Banks in Ethiopia): CAMEL Ratings.

King’ori SN, Kioko WC, Shikumo HD. Determinants of financial performance of microfinance banks in Kenya. Res J Fin Acc. 2017;8(16):1-8.

CBK. Kenya’s Sector Financial Stability report [CBK report]. 2017;2018.

Adusei M. The impact of bank size and funding risk on bank stability. Cogent Econ Fin. 2015;3(1). DOI: 10.1080/23322039.2015.1111489

Ngungu W, N, Abdul F. Firm characteristics and nonperforming loans of commercial banks in Kenya. J Fin Acc. 2020;4(2):31-47.

Yimer MS. Determinants of liquidity in commercial banks of Ethiopia: The case of selected private banks; 2016. Available:http://etd.aau.edu.et/bitstream/handle/123456789/4017/Mekbib%20Shumetpdf?sequence=1&isAllowed=y;([Master’s thesis]. Addis Ababa, Ethiopia: Addis Ababa University).

Mennawi ANA. The The impact of liquidity, credit, and financial leverage risks on financial performance of Islamic banks: A case of Sudanese banking sector. Risk Financ Manag. 2020;2(2):59-72. DOI: 10.30560/rfm.v2n2p59

Mafumbo PW. Credit management, credit policy and financial performance of commercial banks in Uganda. Int J Bus Manag [Review]. 2020;8(5):68-99.

Demsetz H. Industry structure, market rivalry, and public policy. J Law Econ. 1973;16(1):1-9. DOI: 10.1086/466752

Diamond DW. Financial intermediation and delegated monitoring. Rev Econ Stud. 1984;51(3):393. DOI: 10.2307/2297430

Delechat C, Henao CA, Muthoora MP, Vtyurina S. The determinants of banks' liquidity buffers in Central America (WP/12/301). Retrieved from International Monetary Fund website; 2012. Available:https://www.imf.org/external/pubs/ft/wp/2012/wp12301.pdf

Onuonga SM. The analysis of financial stability of Kenya’s top six commercial banks: Internal Factor Analysis. American International Journal of Social Science. 2014;3(5):12-23.

Ngaira AP, Miroga J. Determinants of financial stability of listed commercial banks in Kenya. The strategic Journal of Business and Change Management. 2018; 5(4):1074-97.

Ahmed S, Majeed ME, Thalassinos E, Thalassinos Y. The impact of bank specific and macro-economic factors on non-performing loans in the banking sector: evidence from an emerging economy. J Risk Financ Manag. 2021;14(5): 217. DOI: 10.3390/jrfm14050217

Yensu J, Yusif HM, Tetteh M, Asumadu G, Atuilik DA. Main determinants of banks’ stability: evidence from commercial banks in Ghana. J Fin Econ. 2021;9(2):42-52. DOI: 10.12691/jfe-9-2-1

Kouam H. Financial stability and liquidity risks in the banking sector across the CEMAC region. BMIJ. 2021;9(1): 343-54. DOI: 10.15295/bmij.v9i1.1788

Teresienė D, Keliuotytė-Staniulėnienė G, Kanapickienė R. Sustainable economic growth support through credit transmission channel and financial stability: in the context of the COVID-19 pandemic. Sustainability. 2021;13(5):2692. DOI: 10.3390/su13052692.

Cooper D, Schindler P. Business research methods. 9th ed. Boston: McGraw-Hill; 2009.