Diversification into noninterest income by commercial banks has been born out of the need for ban... more Diversification into noninterest income by commercial banks has been born out of the need for banks to improve their financial performance in the wake of declining revenue majorly due to dependence on interest income. Several studies have been conducted by different scholars on the effect of noninterest income on financial performance of banks. The findings of these studies have had mixed conclusions on the subject with unclear linkage between noninterest income and bank performance. These conflicting outcomes were the basis for this study. Banking Amendment Act, in Kenya, (2016) capped interest rates at 4% on top of the Central bank lending rate. Meaning the ability of banks to charge interest income was also capped. This has forced banks to delve further into noninterest income as a diversification strategy to stabilize performance. Objective: The general objective of this study was to investigate the influence of non interest income on the performance of commercial banks listed on the Nairobi Securities Exchange. Significance: This study will be of value to the government, regulators and policy makers by enlightening them on the effect of noninterest income on the performance of commercial banks thus help them make policies that promote a healthy business environment for commercial banks which will, in turn, enhance the country's economic development. Design: The research design employed was a descriptive survey with a target population of eleven commercial banks listed at the Nairobi securities Exchange. The research employed a data collection guide for secondary data collection. Conclusion: The study concluded that there was a positive relationship between non-interest income and financial performance of commercial banks and non-interest income influenced 28.5% of the total variance in commercial banks financial performance.
Diversification into noninterest income by commercial banks has been born out of the need for ban... more Diversification into noninterest income by commercial banks has been born out of the need for banks to improve their financial performance in the wake of declining revenue majorly due to dependence on interest income. Several studies have been conducted by different scholars on the effect of noninterest income on financial performance of banks. The findings of these studies have had mixed conclusions on the subject with unclear linkage between noninterest income and bank performance. These conflicting outcomes were the basis for this study. Banking Amendment Act, in Kenya, (2016) capped interest rates at 4% on top of the Central bank lending rate. Meaning the ability of banks to charge interest income was also capped. This has forced banks to delve further into noninterest income as a diversification strategy to stabilize performance. Objective: The general objective of this study was to investigate the influence of non interest income on the performance of commercial banks listed on the Nairobi Securities Exchange. Significance: This study will be of value to the government, regulators and policy makers by enlightening them on the effect of noninterest income on the performance of commercial banks thus help them make policies that promote a healthy business environment for commercial banks which will, in turn, enhance the country's economic development. Design: The research design employed was a descriptive survey with a target population of eleven commercial banks listed at the Nairobi securities Exchange. The research employed a data collection guide for secondary data collection. Conclusion: The study concluded that there was a positive relationship between non-interest income and financial performance of commercial banks and non-interest income influenced 28.5% of the total variance in commercial banks financial performance.
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Papers by Patrick Okello