Strategic Factors Influencing the Implementation of Core Banking System Among Commercial Banks in Kenya

Abstract

Commercial banks in Kenya are seeking to upgrade their core banking systems to improve competitiveness, operational efficiency, and regulatory compliance but face challenges in implementing core banking system initiatives. None of the reviewed empirical studies focused on strategic factors that influence the implementation of core banking system among commercial banks in Kenya. Informed by this knowledge gap, this study sought to establish strategic factors that influence the implementation of core banking system among commercial banks in Kenya. This study adopted a descriptive cross-sectional survey research design. The population of this study was the 10 commercial banks in Kenya that have undertaken implementation of core banking system. The study adopted census-sampling technique to sample the 10 commercial banks. The sample size of the study was 60 respondents who were managerial employees in the operations and finance department from each commercial bank. The researcher used both primary and secondary data. Secondary data was obtained from the published annual reports spanning five years (2011-2015) for the commercial banks. Primary data was collected using a questionnaire. The study used descriptive and inferential statistical analysis in terms of regression analysis. The study used both primary data consisting of both quantitative and qualitative data. In analyzing the quantitative data, the researcher used descriptive statistics using SPSS, while qualitative data was analyzed using content analysis. The simple multiple regression model was used to determine the significance of study’s independent variable (strategic factors) on implementation of core banking system. From the study findings, it is concluded that commercial banks in Kenya face a number of factors that determined the success of their strategy implementation efforts. The main factors influencing strategy implementation among commercial banks in Kenya include; communication, leadership, organization structure, resources, policies, politics, economic factors, social-cultural factors, competition, and change management respectively. The factors with the greatest influence on strategy implementation include; communication, leadership, organization structure and resources. The strategic factors that influence the implementation of core banking system among commercial banks the most included; staff involvement, end user involvement, bank-wide employee training, top management support, effective communication, vendor commitment, vendor knowledge transfer, supervision by the board, staff motivation and personal. From the simple regression analysis, it was established that strategic factors contribute significantly to the successful implementation of core banking system among commercial banks in Kenya. The strategic factors had a strong positive influence on implementation of core banking system among commercial banks in Kenya. The study recommends that the management of commercial Bank in Kenya should allocate adequate financial resources required for the monitoring of the new CBS and for its requisite upgrading with the ever-changing banking products being offered by respective commercial banks. The bottom-up and top-down communication should be enhanced to allow for feedback on the success of the CBS implementation as well as in identification and management of any gaps in CBS implementation. Finally, the banks management should continue to lender their support and guidance to the banks’ staff during the whole process of new CBS implementation.