Competition in the Banking Industry in Kenya
Introduction
Banking industry is expected to remain strong even in the midst of adversities and challenges. In every nation, the banking institutions are different and unique among the other type of business. And because of the uniqueness of the banks, there is a great interest paid by the government in strengthening the financial institutions as accordance to their needs, which is an indication of the continuous growth and competition in the industry.
Background and Problem Statement
The Banking industry in Kenya is governed by the Companies Act, the Banking Act, the Central Bank of Kenya Act and other various prudential guidelines issued by the Central Bank of Kenya (CBK). All of the policies and regulations that administer the entire banking industry centers in lifting the controls towards the management and equitable services. With the help of the monetary policy theirs is a formulation of policies that fosters the liquidity, solvency and proper functioning of the financial system. Along with the various developmental changes in the environment, Kenya’s banking industry recognized the growth in assets, deposits, profitability, and adoption of banking services and products (PwC). As a result of the growth in the financial streams and increased innovative programs, the competition in the banking industry tightened.
Research Aim and Objectives
The aim of the study is to provide the current situation, implication, and future effects of the competition in the banking industry particularly in Kenya. To navigate in the continuous investigation on the competition in banking industry, there are three objectives that can serve as guidance. First is to recognize the underpinning factors that increase or triggered the continuous growth in the industry. Second is to determine the strategies that moved the entire industry in reaching the progress. And third to give emphasis on the complex needs that contribute to the large number of services and banking products being offered.
Literature Review
For over the years, the banking industry in Kenya recognized the growth in various financial aspects which makes the note the increase in competition. The growth was traced through looking on the times since there is a successful introduction of innovation and new entrants in the market (PwC). Banks are identified to be one of the major players that support the Kenya’s socio-economic development. Its role in the society is admired because it boosts the confidence in terms of entrepreneurship. The innovative products in the banking industry serve a great advantage not only on the business but also to provide satisfaction on their long-time customers. The continuous excellent performance of the banks reflects in the improvement and stability of the economy. One of the best examples that benefited in the progress of banking sector is the strong existence of small and medium enterprises (SMEs), which became the source of livelihood in Kenya (Ndung’u, 2007). From the past examination and studies regarding the growth in the competition in the banking industry, it is identified the factors such as the internationalization, openness of the financial markets, and banking harmonization which creates an obvious changes in the banking activities, as well as on their performance (Bikker, Spierdijk, and Finnie, 2007). In the continuing adoption of the banking in the area of technology and innovation, there is a great expectation on the mobile payment and mobile banking systems. The banking industry in Kenya exceeds to what is needed in the formal financial sector that leads in the continuous operation in terms of mobile payment. In the long-run it will definitely create an impact in the banking activities and substantially delivers an impression of a strong economy. According to the reports in the financial performance of Kenya, it is noticeable that the mobile banking activities of the customers delivers the best attribute of a bank and thereby, the products and services can adequately provided in Kenya’s population. The value assessed from the person-to-person money transaction, which summarizes the traditional banking activities, is expected to be doubled by the innovative changes in the banking environment (Liu and Mithika, 2009).
Methodology
The suggested method in the study is the use of secondary data that might lead to the recognition of the study objectives. Secondary information can be obtained from the yearly reports connected in the banking industry and its performance for the past years. In addition, there are also essential data coming from the IMF (International Monetary Fund) and/or ADB (Asian Development Bank) to determine the level of competition being interpreted in the banking industry.
References:
Bikker, J.A., Spierdijk, L., & Finnie, P., (2007) Misspecification of the Panzar-Rosse Model: Assessing Competition in the Banking Industry [Online] Available at: <http://www.rug.nl/staff/l.spierdijk/panzar_rosse.pdf> [Accessed 16 June 2010].
Liu, A.T., & Mithika, M.K., (2009) Mobile Banking – The Key to Building Credit History for the Poor?, Kenya Case study: Linking Mobile Banking and Mobile Payment Platforms to Credit Bureaus, (USAID) United States Agency for International Development [Online] Available at: <http://www.microfinancegateway.org/gm/document-1.9.37062/49.pdf> [Accessed 16 June 2010].
Ndung’u, N., (2007) Innovative Products in the Banking Industry in Kenya, KCB Biashara Banking Launch 28 June [Online] Available at: <http://www.bis.org/review/r070817d.pdf> [Accessed 16 June 2010]
PwC Kenya: Banking Industry, PricewaterhouseCoopers© [Online] Available at: <http://www.pwc.com/ke/en/industries/banking.jhtml> [Accessed 16 June 2010].
Credit:ivythesis.typepad.com
0 comments:
Post a Comment