Selected Non – Funded Products and Trade Finance Income among Commercial Banks in Kenya

Abstract

This study was aimed at determining the effect of selected non-funded products on trade finance income among commercial banks in Kenya. The selected non- funded products investigated in the study included: Guarantees; letters of credit and documentary collections. The research design for the study was descriptive with a target population, hence unit of analysis, comprising of 39 commercial banks in Kenya licensed and regulated by Kenya’s Central Bank in the year 2021. The respondents (unit of observation) were 39, representing a trade finance manager from each of the commercial banks. Therefore, the respondents provided data that was analysed using various statistical tools. The study found a substantial association between these products and Trade Finance income using inferential analysis, which included correlation analysis and regression analysis. Piloting of the study was undertaken using 10% of the sample size. These was important in establishing both the validity and reliability of the data collection instruments. The Cronbach alpha scores were above 0.70, hence, giving confidence that the data collection instrument was reliable. The results of the study show that a component of trade finance revenue is affected by the issuance, handling or management of trade finance instruments. The majority of commercial banks’ non-funded bank products, which include letters of credit, guarantees, and documentary collections, are classified as trade finance solutions in the study’s descriptive analysis. Commercial banks in Kenya are urged to expand their trade finance solutions offerings to electronic trade finance products such as electronic letters of credit and electronic guarantees in order to keep up with international best practices