Effect of Financial Management Practices on Performance of Fully Fledged Islamic Banks in Kenya

Abstract

The fully fledged Kenyan Islamic Banks (IBs) do operate in a rapidly changing and competitive banking industry. Given the fact that other conventional banks have ventured into offering of sharia compliant products, the level of competition for IBs has intensified. This increased competition has adversely affected the ability of IBs to perform. This has raised awareness on the need to adopt sound financial management practices. The study sought to determine the interaction between FMPs and the ability of the IBs to perform in financial terms. The adopted design was descriptive and 3 IBs were targeted and sampled out. Information was gathered from auxiliary sources and the analysis was conducted using SPSS tool. It was shown that FMPs have direct and significant interaction with the ability of the firms to perform financially. The study concludes that FMPs have direct and significant interaction with the ability of the firms to perform financially. It is recommended that the Kenyan IBs should improve on their capital structures for positive improvement in performance. Islamic banks should improve on their capital structures for better performance. Islamic banks should exercise caution in maintenance of current assets and current liabilities.