Relationship Between Mortgage Financing And Profitability Of Commercial Banks In Kenya
Mwangi, Margaret R
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Lending is one of the main activities of banks in Kenya and other parts of the world. Mortgage loans have become an important aspect of loan portfolio among commercial banks in Kenya, earning commercial banks’ profits like other type of loans. Profitability, it is always associated with performance and productivity. Mortgage financing over the years has been a preserve for mortgage financing companies but with time, commercial banks have started engaging in mortgage financing. The mortgage market is the third most developed in Sub-Saharan Africa with mortgage assets equivalent to 2.5 per cent of Kenya’s GDP. Prior studies have shown that mortgage financing is positively related to the performance of banks. Mortgage credit is positively related profitability because it creates a long term source of revenue for the bank offering mortgage credit, (Sharpele, 2000). This study was motivated to establish the relationship between mortgage financing and profitability of commercial banks in Kenya. The causal study design was employed in this research. The population for this study was commercial banks in Kenya. The sample of this study was commercial banks that offered mortgage financing between years 2008 to 2012. 30 commercial banks listed on offered mortgage financing during our study period and thus they were the sample for this study. The study collected secondary data for the for five years from 2008 to 2012, on the bank profitability and mortgage lending. Data analysis was done using SPSS Version 20 whereby multiple regression models was employed. The study revealed that mortgage financing has a positive effect on the profitability of Commercial banks in Kenya . The study also established that bank deposits, liquidity, capital and reserves, bank size have a positive effect on profitability of commercial banks in Kenya.
CitationMwangi,Margaret R.;October,2013.Relationship Between Mortgage Financing And Profitability Of Commercial Banks In Kenya.
University of NairobiSchool of Business