The relationship between mortgage financing and financial performance of Commercial Banks in Kenya
Adongo, Dorah M
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The objective of this study was to establish the relationship between mortgage financing and financial performance of commercial banks in Kenya. The researcher reviewed the critical points of current knowledge as far as mortgage financing and financial performance of commercial banks is concerned. The study adopted correlation research and secondary data was used to fulfill the above objective. Annual financial statements of 43 Kenyan commercial banks from 2007 to 2011 were obtained from CBK and data analyzed using the Statistical Package for Social Sciences (SPSS) version 17.0 and a multiple linear regression model. The analysis showed that there is a strong and positive relationship between mortgage financing and financial performance of the commercial banks. Over the years, the commercial banks that provide mortgage financing have had improved profitability and financial performance mainly due to the high interest from mortgages. Other reasons why commercial banks offer mortgage financing are increased market penetration, enhanced cross-selling potential, high profitability and as a competitive strategy. Based on the findings, the study recommends policies that would encourage commercial banks to adopt mortgage financing to enhance their profitability, market penetration and as a competitive strategy. The improved profitability of commercial banks is driven by the high interest rates pegged on mortgages. Therefore, banks should lower the interest rates so that mortgages are affordable resulting to a wider customer base. Further research on mortgage financing and financial performance for a longer time period could add value to the academic literature since this is a field that has not been fully ventured.
University of Nairobi, Kenya