The Effect of Trade Finance on the Performance of Commercial Banks in Kenya

Abstract

The objectives of this study were to determine the effect of trade finance management practices on financial performance of commercial banks in Kenya. The research used a descriptive survey research design. The descriptive survey was ideal because it ensured thorough description of the situation ensuring least possible bias in data collection. The study made use of secondary data collected from annual reports submitted to the CBK for the target population comprised of all the commercial banks in Kenya. Summaries of data findings together with their possible interpretations were presented using tables, charts, correlations, standard deviations and regression. The study found out that mean of fees and commissions‟ transactions were relatively high as compared to other variables while dividend income transactions had the highest standard deviation. Foreign exchange transactions had the highest positive correlation. Fees and commissions also had high and positive correlation to the return. From the regression equation the study concluded that a unit increase in fees commissions, foreign trading, and dividend transactions lead to improvement on return on assets. Therefore; the study recommends that; trade finance should always be taken in to account to improve the banks performance. Policy makers should also undertake to understand risks affecting the banks in order to maximize returns.