| dc.description.abstract | In Kenya there are currently 43 commercial banks and one mortgage financial institution.
Out of these banks 31 are owned by indigenous Kenyans while the rest are foreignowned.
Of the 31 indigenous banks only five have recently established fully-fledged
operations in the regional foreign markets. These markets include Uganda, Tanzania,
Rwanda, Burundi and Southern Sudan. This study sets out to determine the motives of
internationalization of indigenous commercial banks of Kenya. The objectives were to
establish the determinants of internationalization of indigenous commercial banks. The
study was also set to establish the benefits arising from the internationalization as well as
determine the challenges that are faced by these banks as they seek to internationalize. To
answer the research question. 3 commercial banks were targeted for survey out of the 5
indigenous banks with foreign operations. Primary data was collected through interviews
using a structured questionnaire and secondary data was collected by way of desk
reviews of relevant literature. In total 7 senior managers were interviewed from 2 targeted
commercial banks. A number of them were able to fill in the questionnaire on their own
while others preferred a face-to-face discussion. Content analysis was used to analyze the
qualitative data. Descriptive statistics were computed for the quantitative data. The study
finds that the main determinants/motives of internationalization for indigenous
commercial banks revolve around pursuing a business growth strategy and the need to
enjoy economies of scale and scope. Scale economies would not always be achieved in
the domestic market mainly due to competition especially from the more established
players. At the core of the business growth strategy is the need by the banks to follow
their customers and be able to offer holistic solutions across the various countries that
their clients operate in. By serving their customers better they are able to enhance their
network revenues from an end-to-end perspective. The other motive of
internationalization of the indigenous banks into the region is to diversify financial and
political risks. On the other hand, the benefits of internationalization of indigenous
commercial banks include growth in profitability, growth in share prices, growth in asset
and capital base and creation of opportunities for career growth across the various
geographies they operate in. However, to enjoy these benefits the banks have had to
overcome various challenges. Included in these challenges are the different regulatory
and legal frameworks that govern the operation of banks in various countries. Language
and cultural barriers in different countries is also a challenge. Competition for business as
well as availability of adequate and skilled manpower in certain regional markets is also a
notable challenge. The study concludes that the need to follow customers in their
footprint as they diversify markets, to spread and mitigate financial and political risks, to
enjoy economies of scale and scope, and to grow their markets are the key determinants
of internationalization of indigenous commercial banks. Secondly, it concludes that
internationalized banks have benefited from growth in profitability, market share price
and increase in asset base and capitalization. The study recommends that more
indigenous banks seek growth opportunities in the region after conducting comprehensive
feasibility studies. | en_US |
