| dc.description.abstract | Over many years commercial banks have not been involved in provision of micro credit to small and micro enterprises. The sector has remained the preserve of micro finance institutions (MFIs) which by adopting micro finance as a core component in their development aid programs, aim to reduce poverty and also, raise the status of women and disadvantaged communities. Nevertheless, despite its enormous success in tackling poverty, the applicability of microfinance in formal banks remains a major challenge for developing countries where most of the world's poor reside without access to banking facilities. Initially banks had not regarded microfinance as a genuine option due to the risk and expenses involved.
However with the liberalization of the financial sector, which has increased the level of competition in the formal banking market banks are looking for avenues to expand their revenue base. The presence of a large underserved as well as unnerved market in the small and microcredit sector has provided the opportunity for the commercial banks to enlarge their revenues. Banks have also heard about the profits of the successful MFIs in other counties in Asia and Latin America. The research sought to identify the factors driving commercial banks in Kenya to venture into micro banking. The focus was on Kenya Commercial Bank as a case study and the target population was the Coast region, Island branches.
The research design was a descriptive case study approach involving the 8 KCB branch managers in the 8 Island branches and 77 customers served in those branches. The design was chosen because it provides complete and accurate information on the object under study. Both secondary and primary data was collected. Primary data was collected by use of questionnaires while secondary data was obtained through document analysis of information generated from the data warehouse. The collected data were tabulated and the analysed using the 'list and tally' method. After all the responses were tallied, frequency and percentage distribution tables were prepared. Profitability was highly ranked as a factor influencing banks to venture into micro banking and its indicators are the active borrowers, revenues per average loan and the net interest margin.
It was also revealed that micro finance services act as corporate social activities hence they lead to boost the company image. The study therefore concludes that there is a high potential of micro banking since commercial banks have great competitive advantage over MFIs. They should therefore invest widely in their branch networks, well trained staff and service efficiency in order to succeed in micro banking. The key recommendations of the study was that though the uptake of micro banking is good, there is need for training of more personnel in this field as well minimal restriction to profitable lending especially elimination of interest capping by the CBK. Further research is therefore required to establish the challenges faced by commercial banks as they venture into micro banking in the Kenyan market. | en_US |
