MORTGAGE FINANCING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
MORTGAGE FINANCING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Faith Mantaine Manyara - Department of Accounting and Finance, Kenyatta University, Kenya
Dr. Margaret Kosgei - Department of Accounting and Finance, Kenyatta University, Kenya
ABSTRACT
Banking sector institutions are considered to play a very crucial part especially in modern economy of any state. The significance of banking institutions is mostly witnessed especially when it comes to the economic development of any state as they allow money marketing in both developed and developing economies. In other words, for banks to continue to serve as intermediaries, they must have financial stability. However, some commercial banks in Kenya have been performing poorly as they have continued to report distressing financial results. This has been demonstrated by the decrease in ROE for some commercial banks over the years as well as their low global ranking. Therefore, the current study examined the nexus between mortgage financing and financial performance within the Banking sector in Kenya. Specifically, it examined interest charged. To achieve this a descriptive research approach was employed. All 43 licensed banking institutions were evaluated as the survey total population as per CBK. The study population comprised of all the financial institutions that offer mortgage financing as one of their products. The researcher used census survey to select all financial institutions in Kenya that offer mortgage financing. For the data analysis the researcher used correlation and regression model. Thereafter, editing, coding, classification and tabulation were the processing steps that were used to process data for better and efficient analysis. STATA was therefore used to aid the researcher in analysing the data. Based on the findings, it was established that interest charged had a positive and significant effect on the financial performance of commercial banks in Kenya. It was concluded that the rate of interest charged on mortgage issued did contribute significantly towards the financial performance of commercial banks in Kenya. It was, therefore, recommended that commercial banks in the country should consider lowering their mortgage interest rates in order to make mortgage loans accessible to all classes of customers. In addition, it was recommended that commercial banks in the country should strive to diversify their mortgage loans investment so as to enlarge their loan asset base and establish more capacity to provide much more mortgage financing to a wide range of interested customers.
