Diversification strategy used by commercial banks in real estate to gain competitive advantage in Kenya
Abstract
The role of the commercial banks in Kenya cannot be over emphasized as the banking
industry is known for its role in the development of the nation. Banks have continued to
support businesses and individuals by offering loans and accepting deposits. The banking
industry is estimated to control about 30-40% of the country’s GDP. Competition within
the banking sector has been very stiff and banks have gone full throttle in this
competition. Anchored on game theory and industry organization theory, the study
established that to remain competitive, banks have employed the use of diversification in
real estate to remain ahead of their peers. Diversification in real estate is a new concept in
banking as banks attempt to keep pace with innovation. This study sought to establish the
impact of real estate diversification in an attempt to see whether diversification in real
estate will keep the commercial banks competitive. The study found out that there exist
structured real estate diversification and that few banks have remained innovative enough
in this sector. These banks have captured the market and are reaping the fruits of being
the front runners. The study finds that real estate has been a key driver in banking sectors
especially in collateral support when lowering the banks risks but with the new
innovations in this sector, banks which have embraced real estate and diversified their
products in this area remain competitive as reflected in their performance. Some
limitations were encountered in the process of carrying out this study since not all real
estate players were involved. Organizations like housing finance, national Housing
Corporation, Shelter Afrique could have been involved since they contribute a lot in this
industry. There is the need to carry out a similar study on all key real estate players to
ascertain the level of diversification used by these players to gain competitive advantage
Citation
Master Of Business Administration (mba) School Of Business, University Of Nairobi,2013Publisher
University of Nairobi, School of business,