| dc.description.abstract | The purpose of this study is to establish the effect of Islamic banking on investment
financing in Islamic banks in Kenya. This study employed descriptive survey design.
The population of this research consisted of 8 commercial banks offering shariah
compliant products. The study used secondary data. Loans advanced to customers were
collected for a period of four years (2009 to 2012). Data was analyzed using Statistical
Package for Social Sciences (SPSS) and results were presented in frequency tables and
figures. The data was then analyzed in terms of descriptive statistics like frequencies.
means and percentages.
The study findings indicated the relationship on how Islamic banks use their investments
as loans advanced to customers to finance Islamic banks products. Islamic bank
products are the independent variables. The investment is the dependent variable. The
products included motor vehicle financing, mortgage financing, asset financing, real
estate financing, trade financing and SME financing. The study also indicated that there
were various modes of financing used by Islamic banking such as profit and loss
sharing, Ijara and murahaba. Regression results revealed that motor vehicle financing
was statistically significant in explaining loans advanced to customers in Islamic banks.
SME financing were not statistically significant in explaining loans advanced to
customers in Islamic banks but they were positively correlated.
The study concluded that there was a gradual increase of motor vehicle financing in the
year 2010 followed by slight decrease in the following year and then stabilized as it
remained constant at 10%. The gradual increase in 2010 could be because the country
was healing from post election violence and people were ready to start ventures allover
again and the decrease in following years was may be due to fears of elections in
2013.The study concluded that mortgage financing as a source of investment had an
inconsistent pattern as the percentage decreased in the year 2010 and increased rapidly
in 2011 to 12.5% and then decreased again in 2012. The inconsistency can be explained
by more investors using other Islamic banking products for financing more than
mortgage financing. Overall it was possible to conclude that the Islamic banking
products have spread in the banking sector as all the financial products have been used
to a high percentage across the years.
The study recommends that the more time may be required for the unique
characteristics of Islamic financial instruments to be completely accepted and
understood by both bank personnel and customers. It is also recommended that the terms
and conditions of acquiring a loan be made more appealing and considerate for more
investors to approach the banks for assistance as the Shari' ah restricts the type of businesses for which Islamic banks can provide financing. For example, they are not
permitted to participate in certain prohibited investments or joint venture projects
considered to be detrimental to the individual, society, or the environment. | en_US |
