FINANCIAL DETERMINANTS OF THE ADOPTION OF BANCASSURANCE BY COMMERCIAL BANKS IN KENYA: CASE STUDY OF TEIR ONE COMMERCIAL BANKS IN NAIROBI CENTRAL BUSINESS DISTRICT
Abdifatah Khalif Hussein - Master of Business Administration (Finance), Kenya Methodist University, Kenya
Barbara Namiinda - Senior Lecturer, Department of Business Administration, Kenya Methodist University, Kenya
Moses Murithi - Lecturer, Department of Business Administration, Kenya Methodist University, Kenya
ABSTRACT
The purpose of the study is to analyze the financial determinants of the adoption of banc assurance by commercial banks in Kenya. This study specifically looks at the 8 tier one banks in Nairobi’s Central Business District. The specific objectives of the study are as follows: To establish the effect of bank profit on the adoption of bancassurance by commercial banks in Kenya, the influence of bank credit risk on the adoption of bancassurance by commercial banks in Kenya, the effect of bank product diversity on the adoption of banc assurance by commercial banks in Kenya and finally the effect of the cost of the insurance contract on the adoption of bancassurance by commercial banks in Kenya. The study is based on the Financial Intermediation theory, the Modern Portfolio Theory and Diffusion of Innovation Theory. This study used the descriptive survey research design. The target population is made up of 77 Business Development Officers and 64 Operations Officers who are under the bancassurance department in 8 Tier 1 commercial banks in Nairobi’s Central Business District. The study has used census method where by all the 141 respondents are given the questionnaire. The study has used both primary and secondary data. Primary data has been collected using questionnaires while secondary data has been obtained from organizations’ published reports, documentaries, and newsletters, all available in both printed and softcopies. Data analysis has been done with the help of SPSS version 25.0. The study has found out that the bank credit risk is the highest determinant of the adoption of bancassurance by commercial banks in Kenya. An R value of 0.803 indicates that the relationship between the dependent and independent variables is statistically significant. The R squared value of 0.6404 also show that studied factors account for 64% percent of the dependent variable. The study recommends that banks enhance their adoption of bancassurance by ploughing back their profits on financial innovation. This will ensure that customers enjoy fairly priced innovative bancassuarance product. This will not only boost the income of the bank but also boost the customer loyalty. There is need for a committed top management that facilitates the adoption and implementation of Banc assurance as there are significant organizational changes required to adopt the Banc assurance business hence top management must be actively and consistently involved throughout the adoption and implementation process. An important influence on the adoption and implementation of the Banc assurance business is the tight integration of the sales force into the branch network so as to effectively sell a broad range of products hence banks need to invest in training in banking, insurance and investment product knowledge so as to enhance the sales process. Given the increasing complexity of the product lines and the sales process, integrated information support systems must be developed to provide an effective customer experience. This means building appropriate customer databases and integrating information and transaction processing systems to provide customers with a seamless experience regardless of which products or services are being provided.
