EFFECTS OF BUSINESS PROCESS MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI COUNTY, KENYA
Kiruja Kawira Caroline - Master of Business Administration, Kenyatta University, Kenya
Dr. Linda Kimencu - Department of Business Administration, School of Business, Kenyatta University, Kenya
ABSTRACT
Today’s competitive markets make businesses more dependent on their ability to react to changes and adjust their processes to the new requirements. To raise efficiency as is required by the bank’s regulators has a number of limitations that includes a regulated financial market, new customer base and the projected revenue. In this environment, it is a key test for business organizations to transform the vast number of concepts and ideas into products and services. In order to achieve this, a number of banks are thus looking at optimization of internal processes and practices as the front line in the battle for efficiency. In this context Business Process Management is a good support for organizations. The purpose of this study was to establish the effects of business process management practices on financial performance of commercial banks in Nairobi County. The general objective was to establish the effects of business process management practices on financial performance of commercial banks in Nairobi County. The specific objectives were; to establish the extent to which strategic alignment affects financial performance of commercial banks in Kenya, the effects of information technology on financial performance of Commercial banks in Kenya, the role of process improvement on financial performance of commercial banks in Kenya and how employee involvement has affected the financial performance of commercial banks in Kenya. The study was under pinned by the dynamic capability theory, resource-based theory and the contingency theory. The study employed a descriptive research design. The target population of this study was 60 employees from 20 commercial banks spread across Nairobi County at the Head Offices. Stratified sampling technique was used to select the sample size. Simple random sampling was used to select the sample. The study relied on both the primary and secondary data sources where primary data was collected using both structured and unstructured questionnaires and Secondary data was obtained from audited financial statements over a period of five years for adequate representation. Validity and reliability were assessed through a pilot study. Statistical Package for Social Science (SPSS) version 22.0 was used to present descriptive statistics such as percentages, frequency distributions, measures of central tendencies and measures of variations. Data analysis and interpretation was based on descriptive statistics and measures of dispersion as well as inferential statistics. Multiple linear regression models were employed to establish the influence among variables. Pearson correlation was also used to ascertain the potency of the linear relationship between each of the independent and dependent variables. The study would be useful to banks, academicians and the government in that it will aid in formulation of better policies, source of knowledge and will help determine the extent to which BPM has been adopted in the country. From the study therefore it was recommended Policy makers should highly invest on structures, strategies and that determine changes in markets vis a vis its strengths and abilities to harness its full potential. They should adopt an integrated approach and business processes that transform the entire organization paving way for continuous renewal and lasting adding value. There is also need to develop greater awareness on the business process management practices that affect the financial performance of commercial banks. From the multivariate regression applied to determine the importance of every variable on the financial performance of commercial banks in Kenya. The study recommended that further research be carried out to establish what other variables significantly affect the financial performance of banks and the study be extended to non-financial performance.
