Effects of Grants on Financial Performance of Commercial Banks in Kenya

Abstract

Foreign aid has for over half a century been used by developed countries to enhance social and economic development. The major challenges facing majority of the companies including banks in developing economies is their access to adequate finance and poor access to external financing for working capital and long-term investment purpose. Grants present mixed fortunes to the recipient commercial banks. The Kenya commercial banks use these grants as some of their main source finances in Kenya which accounted for 27.58% in form of debt. This study sought to establish the effect of grant on the financial performance of commercial banks in Kenya. This study adopted a descriptive research design. The population was 43 Commercial Banks. The study used secondary data. This would be obtained from published financial statements for the period between 2011 and 2015. Descriptive statistics and multiple linear regression analysis were used. The study concludes that the banks financial performance increased. There was growth in grants received which positively influenced the banks’ financial performance. Grants contribute significantly to increased bank financial performance and significantly affected the financial performance. There is a strong positive relationship between grants and banks financial performance. The study recommends that CBK should maintain the regulation over the grants of commercial banks to increase ease of access as well as its prudent use. The bank managers should increase effectiveness and transparency in management of their resources to increase their ease of access to grants from the international finance bodies and government.