Influence of absorptive capability on organizational performance of tier two commercial banks in Kenya

The purpose of the study was to analyze the determinants of cash flow management on performance practice of commercial banks in Kenya. Specific objectives of the study were to determine the effect of cash forecasting practice on performance of commercial banks in Kenya, to identify the effect of cash accounting practice on performance of commercial banks in Kenya. The study was based on Portfolio theory of Cash Management, Cash Management theory, Transaction Cost theory, Free Cash Flow theory and pecking order theory. The study used mixed research design which involves collecting and analyzing both qualitative and quantitative data. The target population of the study comprised the 6913 employees in management and supervisory cadres in commercial banks in Kenya. Stratified sampling technique was used to identify the sample size in every stratum. Data collection instruments were both structured and unstructured questionnaires. Data collection methods were both primary and secondary. The data was analyzed using Statistical Program for Social Sciences (SPSS) windows version 21.Multiple linear regression analysis was carried out to analyze the determinants of cash flow management on performance of commercial banks in Nairobi City County, Kenya. Pilot test was carried out for validity and reliability of research instruments. Regression analysis was carried out to test the significant levels of one variable to the other in the study. ANOVA was carried out to test the hypotheses of the study. The study is significant to the banking sector and the government of Kenya in formulation of different financial decisions and in policy making. The results of the study indicate that all the independent variable have a significant positive effect on performance of Commercial banks Kenya. The findings revealed that commercial banks in Kenya carry out cash flow forecasting practice and that inflation rates influence interest rates in commercial banks in Kenya. Cash accounting practice was found to be positively related to performance of commercial banks in Kenya. The study recommends that the management of commercial banks in Kenya should be enhanced through frequent audits to be able to curb interest rates especially the unanticipated inflation which adversely affects the functions of money by undermining wealth holders’ confidence in its ability to be used as medium of exchange and store of value. Keywords: Cash Accounting, Financial Performance DOI : 10.7176/EJBM/11-17-03 Publication date :June 30 th 2019

This study is set out with the general objective of establishing the effect of digital technologies on the effectiveness of internal audit function in commercial banks in Kenya. The research is guided by the following specific objectives; to determine the effect of artificial intelligence on the effectiveness of internal audit function in commercial banks in Kenya; to determine the effect of cognitive technology on the effectiveness of internal audit function in commercial banks in Kenya; to determine the effect of data analytics on the effectiveness of internal audit function in commercial banks in Kenya; to assess the effect of robotic process automation on the effectiveness of internal audit function in commercial banks in Kenya; to determine the joint effect of digital technologies (artificial intelligence, cognitive technology, data analytics and robotic process automation) on the effectiveness of internal audit function in commercial banks in Kenya. The research employed descriptive research design. The target population for the study was all the 39 licensed commercial banks in Kenya. A census of the population was used in this study. Primary data was collected using closed questionnaires. Descriptive and inference statistics were used to analyze the data with the help of Statistical Package for Social Sciences (SPSS) Version 23 programme. Pearson correlation was used to establish the strength of the independent variable on the dependent variable. Regression (Simple and multiple) analysis was used to establish the effect of the independent variable on dependent variable. The data analyzed was presented in the form of tables, pie charts and graphs. The study examined the effect of digital technologies artificial intelligence (AI), cognitive technology, data analytics, and robotic process automation (RPA) on the effectiveness of the internal audit function in commercial banks in Kenya. The findings indicated that AI and RPA had a positive and significant impact on internal audit effectiveness, whereas cognitive technology and data analytics did not have a statistically significant effect. However, when analyzed jointly, all digital technologies had a significant and positive joint effect on internal audit effectiveness. Develop comprehensive digital transformation strategies: Banks should take a holistic approach in implementing digital technologies to maximize their combined impact on the internal audit function. Regulators should develop policies that guide the ethical and effective use of AI and RPA in internal audit functions. The government and regulatory bodies should incentivize banks to integrate digital technologies to improve transparency and efficiency in auditing.

Deteriorating loan portfolio quality is negatively impacting the financial performance of commercial banks in Kenya. Though, Kenya’s banking sector is well established and plays key part in developing county’s economy, it is facing constraints in terms of absolute growth due to this declining loan portfolio quality. Consequently, stakeholders of these commercial banks especially creditors, depositors and shareholders are incurring huge financial losses in absolute terms on their deterioration. Although, there are studies that have established the factors that affect commercial banks’ financial performance, until the time of the study there were unresolved issues. This calls for commercial banks need to be proactive like modernizing their risk mitigation measures to more precise measures to deal with expected credit losses. Banks need to change in this time of enhanced financial information, computing power and data analytics for best-in-class fair projection of credit risk for tangible competitive benefits. Study has demonstrated need for robust approach to commercial banks’ lending in dynamic financial markets for sustainable commercial banking financial performance in Kenya. Study aimed at assessing loan portfolio quality on financial performance of commercial banks in Kenya. Study objectives were to: determine significance of loan loss provision on financial performance of commercial banks in Kenya, evaluate allowance for loan loss impact on financial performance of commercial banks in Kenya and gauge bearing of gross impaired loans and advances on financial performance of commercial banks in Kenya. Researcher classified loan portfolio quality indicators as independent variables, regulatory frameworks, market and infrastructural dynamics as intervening variables, and measures of financial performance of return on assets and equity of commercial banks in Kenya as dependent variables. Research utilized descriptive design using percentages, mean, standard deviation, correlations, and panel data regression model. Researcher narrowed down targeted population to 38 fully operational commercial banks in Kenya by end of year 2020. Study applied census approach and relied on published audited financial reports. Researcher used document review secondary data collection tool and analysed data using SPSS program Version 24.0 supported by Microsoft excel windows 2010. Tables and figures were used to present study outcome. There was largely positive significant correlation between each independent and dependent variable proxies. Although on contrary, allowance for loan loss and gross impaired loans and advances association with return on equity were positive and negative insignificant correspondingly. Study general conclusion was that loan portfolio quality largely had positive significant association with Kenya’s commercial banks’ financial performance. Ccoefficient of determination of return on assets and return on equity were 0.1620 and 0.0363 respectively. That meant loan portfolio quality was responsible for 16.20% and 3.63% change in Kenya’s commercial banks’ financial performance in terms of return on assets and equity respectively. Overall, it is resolved, loan portfolio quality parameters; loan loss provision, allowance for loan loss and gross impaired loans and advances are determinants of financial performance (return on assets return on equity) of Commercial banks in Kenya.The study recommends management of these banks need to vigorously pursue measures to effectively manage loan portfolio quality to realise rising returns on assets and equity.

This study determined the effect of liquidity capacity on the financial performance of commercial banks in Kenya. Specific the study determined the effect of Net Stable Funding, Liquidity Coverage, Liquidity Gap and Provisioning for Non-Performing Loans on the financial performance of banks in Kenya. Bank competition variable was used to determine the moderating effect on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya. The study was anchored on the positivism philosophy. The study used an explanatory research design. The study applied panel data models (random effects) based on the outcome of Hausman specification tests to determine the effect of liquidity capacity on the financial performance of commercial banks in Kenya. To test the moderating effect of bank competition variable on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya, Keppel and Zedeck (1989) two-step procedure was used. The regression results revealed that Net Stable Funding and Liquidity Coverage have a significant positive effect on financial performance of commercial banks in Kenya. Provisioning for Non-Performing Loans Liquidity Gap and Provisioning for Non-Performing Loans had a significant negative effect on financial performance of commercial banks in Kenya. The study established that bank competition had a significant moderating effect on the relationship between liquidity capacity and the financial performance of commercial banks in Kenya. Based on these findings, the study recommends that commercial banks in Kenya need to have a good appreciation in terms of having full visibility of all cash flows on the positions of exposures across their operations. Further, they need to have a good insight in terms of the assumptions that drive the cash flows both from a liquidity point of view and from the valuation perspective to best address the terms of requirement from the regulatory standpoint. Additionally, they should empress the stress testing element into the overall equation of their operational activities as prescribed in the Basel III accords. Finally, the study recommends that all commercial banks in Kenya should incorporate liquidity costs, benefits, and risks in the performance measurement, pricing, and approval process for all significant business activities to ensure that the performance of commercial banks in Kenya is enhanced. This research was unable to identify all the possible variables with explanation power on commercial banks’ financial performance in Kenya. Hence, this formed a basis for further research.

Commercial banks in Kenya have embraced alternative banking channels which represent a shift in delivery of banking and financial services since the alternative banking have become synonymous with commercial banks in Kenya. While banks have succeeded in leveraging available technology and provide alternative avenues to customers for banking services, the challenge it faces today is optimizing the usage of these channels so as to improve on their performance. The general objective of this study was to investigate the effects of financial innovations on the performance of commercial banks in Kenya. The specific objectives of the study were to examine the influence of internet banking, mobile banking, agency banking and ATM banking on the performance of commercial banks in Kenya. The study was guided by agency theory, balanced score card and diffusion of innovation theory. This study employed a descriptive research design. The study targeted44 commercial banks in Kenya as at 2017. The 16 banks which embrace all the four financial innovations from 2013 to 2017were selected using purposive sampling method. The sample size was 80 respondents who comprised of 5 senior management employees in each of the selected banks.This study used questionnaire to collect primary data from the respondents. Content analysis technique was used to analyze qualitative data collected from open ended questions in and reported in narrative form. Descriptive statistics such as mean and standard deviation were used to analyse the quantitative data. Multiple regression analysis was used to show the relationship between independent variables against dependent variable. The study revealed that internet banking, mobile banking, agency banking and ATM banking had a positive and significant effect on the performance of commercial banks. Thisstudy concludes that the banking industry has benefited tremendously from the development of the Internet. The Internet fundamentally changed the way in which banking networks are designed to meet the client demands and expectations. Mobile banking provides a good opportunity to commercial banks in Kenya to reach many mobile phone subscribers in Kenya who had remained unbanked and unreached due to limited access to bank branch networks in the country. The access to the large masses through mobile banking of the population gives banks the opportunity to grow by reaching the unbanked population. Agency banking has led to accessibility of financial service to many customer in remote areas and hence an increase in effectiveness and efficiency in service delivery. Customers are satisfied with the automated teller machine services because of ease of use, transaction cost and service security but not satisfy with automated teller machine dispense of cash. The study recommends that the public and businesses must be encouraged to use Internet banking in their daily activities, including deposits, payments and money transfers. Commercial banks in Kenya should ensure convenience and security of mobile banking through written guidelines on convenience and security of mobile banking. Commercial banks in Kenya should increase the number of agents in estates and in the rural areas. This can be done by reducing the requirements of becoming a bank agent. The banks should employ customized software that records relevant information on automated teller machine cards so that banks can establish whether unauthorized transaction has taken place or not.

The purpose of the study was to analyze the effect of Liquidity management on performance of commercial banks in Kenya. The study was based on Portfolio theory of Cash Management, Cash Management theory, Transaction Cost theory, Free Cash Flow theory and pecking order theory. The study used mixed research design which involves collecting and analyzing both qualitative and quantitative data. The target population of the study comprised the 6913 employees in management and supervisory cadres in commercial banks in Kenya. Stratified sampling technique was used to identify the sample size in every stratum. Data collection instruments were both structured and unstructured questionnaires. Data collection methods were both primary and secondary. The data was analyzed using Statistical Program for Social Sciences (SPSS) windows version 21.Multiple linear regression analysis was carried out to analyze the determinants of cash flow management on performance of commercial banks in Nairobi City County, Kenya. Pilot test was carried out for validity and reliability of research instruments. Regression analysis was carried out to test the significant levels of one variable to the other in the study. ANOVA was carried out to test the hypotheses of the study. The study is significant to the banking sector and the government of Kenya in formulation of different financial decisions and in policy making. The results of the study indicate that all the independent variable have a significant positive effect on performance of Commercial banks Kenya. The findings revealed that commercial banks in Kenya carry out liquidity management practice and that inflation rates influence interest rates in commercial banks in Kenya. Liquidity management practice was found to be positively related to performance of commercial banks in Kenya. The study recommends that the management of commercial banks in Kenya should be enhanced through frequent audits to be able to curb interest rates especially the unanticipated inflation which adversely affects the functions of money by undermining wealth holders’ confidence in its ability to be used as medium of exchange and store of value. They should also maintain the minimum liquidity requirement as stated by the Central Bank of Kenya as both illiquidity and excess liquidity are financial diseases that can easily erode the profit base of a bank as they affect bank's attempt to attain high profitability-level. They should also put into consideration liquidity levels in pursuit of high profit for it can cause great illiquidity, which reduces the customers' patronage and loyalty. Keywords: Liquidity, Financial Performance DOI : 10.7176/EJBM/11-17-04 Publication date :June 30 th 2019

In 2016, Kenya enacted the Banking (amendment) Act 2016 which allowed lending interest rates charged by Commercial Banks in Kenya to be fixed at the Central Bank Rate plus a spread of 4% and deposit rates at 70% of the Central Bank Rate. Many banks protested this move since it meant reduced profitability. As a result, commercial banks introduced stringent credit qualification criteria locking out many borrowers who would have otherwise qualified for credit. Therefore, this study sought to establish how interest rate capping affects credit uptake of Commercial Banks in Kenya. The objectives of the study were; to determine the effect of capping lending interest rates, capping deposit interest rates, deposit interest rate spread on credit uptake of commercial banks in Kenya and the moderating effect of inflation risk premium on the relationship between interest rate capping and credit uptake of commercial banks in Kenya. The study was guided by four theories namely: Irving Fisher's Theory of Interest Rates, the Fisher Effect, Loan Pricing Theory and Loanable Funds Theory. The study conducted diagnostic test on multicollinearity normality test and Heteroscedasticity test. The study adopted descriptive research design. The target population for the study was all the 40 licensed commercial banks in Kenya. The sampling frame for the study was all (40) licensed commercial banks in Kenya. This study collected both primary and secondary data because both data reinforced each other. Primary data was collected using semi-structured questionnaires, while secondary data was collected from audited and released financial statements of Commercial Banks in Kenya for the period 2014–2019. The data was analyzed using multiple regressions and descriptive statistics namely: mean median, mode and standard deviation. Quantitative data was presented using tables, pie charts and bar graphs while qualitative data has been presented descriptively. The study established that while capping lending interest rates and interest rate spread had a significant effect on credit uptake of commercial banks in Kenya, capping deposit interest rates was insignificant and the relationship was significantly moderated by inflation risk premium. The study concluded that interest rate spread had the largest effect on credit uptake of commercial banks in Kenya followed by capping lending interest rates and lastly capping deposit interest rates. The study recommends that when formulating policies on interest rate capping, the Central Bank of Kenya should focus more on the lending side as compared to the deposits side. Keywords: Interest rates capping, Credit uptake, Lending interest rates, Deposit interest rates, Interest rates spread, Inflation risk premium.

Financial performance is important among banking institutions. The ability to reinvest earnings and aggressively compete for the market share in the business environment is determined by the level of profits. In recent past, Kenyan commercial banks financial performance has declined due to a number of factors ranging from decline in PAT, interest capping, increased competition and rise in non-performing loans. This has created a need for income diversification where commercial banks are diversifying into shariah banking so as to attract investors with an interest in shariah compliant products and services. The main research objective was to investigate shariah compliant banking effects on the selected Kenyan commercial banks in terms of financial performance. The independent variables employed in the study were liquidity, efficiency and asset quality as determinants of financial performance of commercial bank. There are major gaps in the financial performance literature regarding shariah compliant banking. Minimal research studies have been carried on financial performance comparison between commercial and shariah compliant banks in Kenya. In order to achieve the research objectives, descriptive research approach was employed in the study. A census study was carried out; secondary data from relevant central bank data will be used. The population was the four commercial banks operating shariah banking in Kenya. Secondary data from 2013 to 2017 was obtained from the central bank website and the audited financial statements of the selected licensed commercial banks operating shariah banking in Kenya. Data analysis was achieved through use of descriptive, correlation and regression methods. Data was processed through Statistical Package for Social Science software (SPSS). Data was analyzed using descriptive and inferential analysis and presented using charts and tables. Ratio analysis and trend analysis was used in the study. The study aimed at using the framework of innovation diffusion theory to suggest a model for adoption of shariah banking in the Kenyan banking industry, modern portfolio theory to explain the importance of diversified portfolio in the Banking Sector and Agency Theory. The study found commercial banks’ performance was as a result of that Shariah banking ratio then by liquidity ratio, efficiency ratio, asset ratio, and finally bank size. Bank size had a ratio of 0.0128, expense management ratio 0.0131, efficiency ratio 0.0024, Asset quality 0.0006, liquidity ratio 0.0120 and sharia banking ratio was 0.0025. It was revealed by the research that commercial banks’ adoption of shariah banking positively influenced their financial performance. This research recommends that same studies to be carried out in Africa’s Eastern part to compare since shariah banking’ concentration is on the Asian and West Africa countries. The research recommends that commercial banks management take advantage of its existing branch networks to open shariah banking alongside its core business in tapping the potential new clientele.

Commercial banks in Kenya as per the World Bank report were recording higher non-performance in loans over the study period than the standard globally in spite of Kenya having the most stable and developed banking system in East and Central Africa region. Commercial banks non-performing loans for five years from 2015 to 2018 averaged eleven percent which was higher than the recommended rate of one percent. In Kenya, commercial banks’ non-performing loans remain higher than the recommended rate which could be due to inadequate credit management practices. The study therefore aimed at examining the effect of credit management practices on loan performance of commercial banks in Kenya. Specifically, the study sought to establish the effect of debt collection policy, client appraisal and lending policy on the loan performance of commercial banks in Kenya. The underpinning theory of the study was the 5Cs model for credit. The study used explanatory research design and the research philosophy adopted was positivism. The target population was 44 commercial banks in Kenya and a census approach was used. Both primary and secondary data were used. Primary data was collected through structured questionnaires and related to credit management practices while secondary data was obtained from review of existing bank loan records in relation to loan amount advanced and non-performing loans for a period of four years from 2015-2018. The data collected was analyzed using both descriptive and inferential statistics with the help of SPSS version 22. The study found out that debt collection policy and lending policy had a positive significant effect on loan performance of commercial banks in Kenya. However, client appraisal had no significant effect on loan performance of commercial banks in Kenya. Therefore, the study concluded that commercial banks’ loan performance could be largely attributed to the efficiency of the credit management practices put in place at the institutions. The study recommended that commercial banks to regularly evaluate and update practices relating to debt collection policy, client appraisal and lending policy that are capable of ensuring that credit risks are identified and recorded from departmental level to the institution at large. This is vital in light of technological innovations in the banking sector like mobile lending that may limit commercial banks’ ability to evaluate and manage credit using traditional methods.

The competition dimensions have changed following the adopting of various internet banking services that came about as a result of technological innovations such as the introduction of Automated Teller Machines (ATMs), phone banking Personal computer banking which were some of the first innovations of electronic finance. The main objective of this study was to establish the impact of mobile banking services on the financial performance of commercial banks in Kenya. The specific objectives guiding this study included to assess the influence of short message service (SMS) banking on the financial performance of commercial banks in Kenya, to establish the effect of person to person payments on the financial performance of commercial banks in Kenya, to determine the effect of bill payments on the financial performance of commercial banks in Kenya and to find out the effect of airtime top up service on the financial performance of commercial banks in Kenya. The research design that the study adopted was a descriptive research design employing quantitative research strategies. In this study the target population under investigation was all the 40 commercial banks in Kenya. Since in the current study the target population was 80 participants from all the 40 commercial banks in Kenya a census inquiry method was the best method used. Primary data for this study was collected through the use of a questionnaire that was given senior managers from all the departments of these organizations. Both quantitative and qualitative data was generated in this study. Qualitative data was analysed using content analysis whereby content of responses was looked at and responses were grouped together in relation to common patterns or themes for coherent categorization. Descriptive statistics included measures of central tendency and dispersion thus standard deviation and mean and use of absolute and relative percentage frequencies. Presentation of quantitative data was in form of graphs and tables and explanation given in prose. The study findings show that short message service had an above average positive correlation with financial performance of commercial banks and was statistically significant. Person to person had an average correlation with financial performance of commercial banks and was statistically significant. Bill payments had a strong positive correlation with financial performance of commercial banks and was statistically significant. Airtime top up service had an strong positive correlation with financial performance of commercial banks and was statistically significant. The study concludes that short message service banking has become and important part of banking, more and more people prefer to receive banking alerts through short message service which has not only improved service delivery but has had a positive impact on financial performance. Commercial banks have experiences large revenues from different activities with the banking system core among them the bill payments activities. The study recommends that it is important for commercial banks to focus more on short message service banking to lower operational costs thereby improving financial performance. Commercial banks need to consider using person to person payments to improve on their performance, they need to enhance their bill payments to get more clients paying bills using their systems so as to improve on their financial performance and that it is important for commercial banks to put more effort on airtime top up service so as to improve on their financial performance.

The Kenyan banking industry plays a vital role in economic development of the country. However, performance in the banking sector has not be satisfactory given that there are commercial banks that have collapsed while others are under receivership or operating under statutory management. In light of this fact, the purpose of the study was to investigate the effect of macroeconomic factors on financial performance of commercial banks in Kenya. The study was informed by the following objectives: to determine the effect of exchange rate on financial performance of the commercial banks in Kenya; to establish the effect of real Gross Domestic Product on financial performance of the commercial banks in Kenya; to assess the effect of inflation rate on financial performance of commercial banks in Kenya; and to determine the effect of real interest rate on financial performance of the commercial banks in Kenya. The study utilized a causal research design and carried out a census of all the 35 commercial banks that were fully operational for the period 2011-2019. The study used secondary data, which was extracted from the Central Bank of Kenya, Kenya National Bureau of Statistics, and banks’ audited financial statements. Both descriptive and inferential statistics were used in data analysis. Panel regression model was used to establish the effect of macroeconomic factors on financial performance of commercial banks in Kenya. Presentation of data was aided by tables and diagrams. The findings of the study showed that exchange rate and interest rate significantly affected financial performance of commercial banks in Kenya. On the other hand, GDP growth rate and inflation rate did not significantly affect financial performance of commercial banks in Kenya. The study concluded that exchange rate and interest rate affected financial performance of commercial banks. Conversely, the study concluded that financial performance of commercial banks in Kenya was not affected by GDP and inflation rate. The study recommends that policy formulation in the banking sector should take into consideration the exchange rate as the basis of managing its effect on financial performance. Moreover, the study recommends that commercial banks should moderately raise their interest rates in the quest to increase profitability in the banking industry.

The determination of interest rate spread in commercial banks is influenced by various macroeconomic variables, market microstructure features and the policy environment. However, studies on factors that contribute to the interest rate spreads among commercial banks in Kenya have produced mixed results that calls for further research. This study aimed to assess the determinants of interest rate spread in commercial banks in Kenya. Specifically, the study sought to establish the effect of inflation rate, domestic borrowing, credit risk and exchange rate risk on the interest rate spreads among commercial banks in Kenya. The study was anchored on fisher hypothesis, classical theory of interest and loanable fund theories. Explanatory research design was adopted to establish the causal relationship between the study’s variables. Secondary data of the study for the period between 1970 -2022 was extracted from annual financial statements of commercial banks targeted by the study and Central bank of Kenya annual reports. Data was analyzed through descriptive and inferential statistics. The study adopted the regression model to obtain results. Based on the regression results, the study found that domestic borrowing had a significant positive effect on interest rate spreads among commercial banks in Kenya. Additionally, the study found that inflation rate, credit risk and exchange rate risk had a significant positive effect on interest rate spreads among commercial banks in Kenya. The study concluded that macroeconomic variables such as inflation rate, domestic borrowing, credit risk and exchange rate risks are key determinants of interest rate spread among commercial banks in Kenya. The study made the following recommendations to regulators and policy makers. First, ensure that the central bank's monetary policy actions effectively influence interest rates throughout the banking system and also Implement mechanisms to improve the transmission of changes in the central bank's policy rates to commercial banks' lending and deposit rates. Secondly, establish a framework for monitoring key macroeconomic indicators such as inflation, economic growth, exchange rates, and fiscal policies to identify potential factors impacting interest rate spreads and use the monitoring results to formulate timely and appropriate policy responses. The study recommends that future studies should conduct studies across different countries which could provide a more comprehensive understanding of the subject matter.

Small and Medium Enterprises (SMEs) access to external finance is an issue of significant research interest to academicians. Commercial banks consider many SMEs not to be credit worthy because of their inability to meet some banking requirements. Hence, the objective of this study was to investigate what determines lending to SMEs by commercial banks in Kenya. To achieve the study objectives, a descriptive research design was employed. The study undertook a census of the 43 commercial banks in Kenya, with full data being obtained for 36 institutions. The study used secondary data from the annual published reports of commercial banks in Kenya for a period of 5 years from 2010-2014. The data collected was analyzed through the multiple linear regression using the Statistical Package for Social Studies version 20.The study established that bank size and liquidity significantly influences (positively and negatively, respectively) lending to SMEs by commercial banks in Kenya while credit risk and interest rates have no significant influence on lending to SMEs by commercial banks in Kenya. The study recommends that lending to SMEs by commercial banks in Kenya be enhanced by adopting policies that grow the commercial banks.

To meet the changing needs of their customers, commercial banks have been diversifying their services and product offerings. However, increased competition from other financial institution and telecommunication companies has caused commercial banks to fall short of their targets. Therefore, this study sought to investigate the influence of customer relationship management on competitive advantage of commercial banks in Kenya. The specific objectives of the study were to examine the influence of technology, customer orientation, stakeholder involvement and product customization on competitive advantage of commercial banks in Kenya. The study was guided by resource-based view theory, Ansoff matrix theory, diffusion of innovation theory and stakeholder theory. The research used descriptive research design. The target population for this study was four selected commercial banks in Kenya namely, Kenya Commercial Bank, Equity Bank, Cooperative bank, and Family bank. In respect of this study, the total number of respondents was 183 respondents comprising of 145 sales and marketing staff and 38 management staff. The respondents in this study were stratified according to their respective responsibilities. A simple random sampling technique was used to choose the respondents from each stratum. The sample size was 126 respondents. A structured questionnaire was used as data collection instrument. Questionnaires were piloted to 12 respondents from the National bank of Kenya because it is one of the commercial banks in Kenya. Content validity was used to measure research instrument validity. Reliability was measured using Cronbach alpha test. Qualitative data was analyzed qualitatively by organizing data into themes based on study objectives and the results will be presented in narrative form. Quantitative data was analyzed using descriptive statistics such a mean and standard deviation. In addition, inferential statistics was applied using multiple regression analysis because there is more than one explanatory variable involved in this study. The analyzed data was presented using tables and figures. The study found from the regression analysis results that technology, customer orientation, stakeholder involvement and product customization had a positive significant influence on competitive advantage of commercial banks in Kenya. The study concluded that introduction of technology change’s organizational structure and, in so doing, alters the rules of competition, creates competitive advantage by giving companies new ways to outperform their rivals and changes whole new businesses, often from within a company’s existing operations. When customers feel that they are valued and their needs are being met, they are more likely to remain loyal to the bank. Effective engagement helps translate stakeholder needs into organizational goals and creates the basis of effective strategy development. Product customization leads to better customer insights because gaining customer insights provides businesses with a competitive advantage and helps them create products that customers are interested in. The study recommended that commercial banks in Kenya should increase automation of processes to increase efficiency and productivity while reducing costs. Commercial banks should put the customer at the very center of its values and goals and every department must be based on this philosophy. The commercial banks should have a clear vision derived from a robust strategic planning process, and an effective strategic plan or marketing plan can only come from stakeholder engagement. The commercial banks should understand their customers’ desires, preferences, and transaction habits to gain customer loyalty.

Overview: Determining strategic direction for an organization rests squarely on the leadership at the strategic level and it involves developing a long-term vision for the organization. It entails establishing a strategic plan, developing strategic goals for the organization and articulating an organization's vision and mission, hence this role is important and cannot be left without proper leadership. It is the responsibility of the Chief Executive Officer (CEO) working at close range with the Top Management Teams (TMTs) in providing general guidelines as to where the organization intents to go and the appropriate steps in place to enable the organization reach its goals. Tracy O'Rourke, CEO of Varian Associates agreed with this view and stated that; if you are going to do well in the long run, you need to have some ability of yourself or in combination with others to come up with a vision and follow it with believable and implementation action plans. Strategic leaders need to develop a vision, mission and values to guide an organization in her future. Organizational mission to help that organization pose superior performance must support strong values illustrated by a vision. Therefore, strategic leaders must inspire their workforce to higher levels of achievements by demonstrating to them how their work and responsibilities contribute to the future direction of the organization. Purpose: The study sought to investigate the influence of strategic direction determination on the performance of commercial banks in Kenya. The study was enhanced by path-goal theory which asserts that role of the leader is to clarify goals through strategic vision, mission and intent to the subordinates. He also holds a position of ensuring that these goals are well articulated and understood by the subordinates for implementation. Methodology: The study targeted 577 strategic leaders in commercial Banks in Kenya. The main respondents included; The Chief Executives, Executive Directors and Senior Managers. 277 questionnaires were administered out of which 179 were returned. This represented a percentage rate of 75% response rate. A descriptive survey design was adopted in the study to show the relationship between the study variables. The design was adopted because it’s concerned with a description of phenomena and characteristics linked to the study giving information in regard to its natural occurrences and behavior. Self-administered questionnaires were used in collection of data from the respondents. Collected data was analyzed using SPSS. Both descriptive statistics and inferential statistics were used in analyzing the data. The study clarified the relationship between strategic direction and performance of commercial banks in Kenya. Findings: Statistics revealed that ANOVA statistic was F (1, 177) = 28.275 , p <0.00. This showed that the regression model was statistically significant in predicting the dependent variable. Therefore, the elements of strategic direction establishment explained variations in performance of commercial banks in Kenya. The R 2 = 0.138 indicates that approximately 13.8 per cent of the competitiveness is explained by the strategic direction establishment practices. The beta coefficients: constant, β 0 = -0.022 (t = -2.504, p< 0.05); strategic direction establishment, β 1 = 0.371 (t = 2.55, p< 0.05) and p-values < 0.05 indicated that all the coefficients were statistically significant. This regression model has two implications; first, holding the strategic direction establishment practices at zero, the rise in competitiveness of the commercial banks would be -0.022 units; second, a unit change in strategic direction establishment practices would lead to a 0.371 change in competitiveness. Recommendation: The study established that strategic direction establishment practices have a significant positive effect on performance of commercial banks in Kenya. The study therefore recommends that the top management teams for commercial banks in Kenya should enhance practices for strategic direction determination. Strategic leaders are challenged to establish vision; mission and values for a strategic direction that will help their organization attain competitive advantage in the future. The CEOs and the top management team should practice quick decision making to mitigate or use opportunities affecting the industry at any time while also thinking of possible solutions to unexpected challenges. Key words: Strategic direction, Strategic Leadership, Performance, Commercial Banks, Kenya CITATION : Kisiangani, B. W., Mukanzi, C., & Miroga, J. (2023). Strategic direction determination and performance of commercial banks in Kenya. The Strategic Journal of Business & Change Management, 11 (1), 1 – 7. http://dx.doi.org/10.61426/sjbcm.v11i1.2834