Abstract: Commercial banks and particularly Islamic Banks play vital role in the Kenyan economy as well play as indicators of strength of country economy. Over the last few years, Islamic banks have changed the way of doing business specially the banking sector. Specific characteristics that are unique to specific firms have underlying effect on their financial performance of Islamic banks in Kenya and were subject for empirical discussion for so long. The government of Kenya in collaboration with Muslim Faithfull has recognized the important of Islamic Banks in economic growth and deepening of financial services to its citizens in the Constitution. However, given the potential benefits of Islamic Banks have to the general economy and the well-being of its citizen, specific characteristics of these banks and its effects on financial performance have been of great concern and importance. The study investigated how specific or unique entity characteristics affect the performance of Islamic banks in Kenya. We focused on the three (3) main Islamic banks licensed and operating in Kenya for the period of (2010 - 2016.) Several researchers have studied firm specific/ unique characteristic and its effect on financial performance of other conventional banks as well as their growth of the firm entity but gave little information on Islamic banks hence necessitated for this research project. This study found out that Islamic banks in Kenya were affected by its own individual firm characteristic namely firm size, firm age, size, and liquidity and board size of firm as measured by overall financial performance. Previous studies gave mix and inconclusive findings on how size, firm age, liquidity and board size affect financial performance. In attempt to interpret the effect of specific firm characteristic and its financial performance on Islamic banks, this study employed descriptive research design. Secondary data from audited financial statement of respective banks and data from the central bank of Kenya was also analyzed. This study heavily relied on primary data collected by the use of questionnaires directly administered. A pilot study was validated as a research instruments. Data collected from field was analyzed by use of Statistical Package for Social Sciences (SPSS) Computer Package version 22, to evaluate how individual firm entity specific characteristics affect its financial performance of Islamic banks in Kenya, the study figured out three fully fledged Islamic banks in Kenya as study population though there a number of other conventional banks that offer sheriah window product. The finding of the research helped the board of directors, local investors, the government and regulatory bodies to monitor and evaluate performance of the Islamic banks for well-being of the economic. Islamic banks should carry out more research and developments as this still grey area that needs more research in order to understand fully Islamic banks.
Keywords: specific firms, Islamic Banks, Kenyan economy, banking sector.
Title: EFFECT OF FIRMS’ SPECIFIC CHARACTERISTICS ON FINANCIAL PERFORMANCE OF ISLAMIC BANKS IN KENYA
Author: MOHAMED HASSAN SALAT, PROFESSOR WILLY MUTURI
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Research Publish Journals
