Effect of Fiscal Policy on Financial Performance of Banking Sector in Kenya

Abstract

The performance in economic sector can reach the highest notch with the reinforcement from the fiscal policies. Banking sector is crucial in the economy for its jurisdiction and unique responsibility. It is composed of banking institutions. It mandates extends from linking the poor and the rich to providing safe custody of expensive items. The performance explains the success status of the business. The overall metrics seeks to demonstrate financial health of the business. Correspondingly, fiscal policies streamline the government operation and ensures the proper money circulation. The fiscal policy are important to the firms since the purchasing power is key for their operation. Therefore, to assess the effect of fiscal policy on the financial performance of banking sector in Kenya. Study used descriptive research design. Its chief mandate is to allow the effective, efficient and smooth combination of research techniques to arrive at maximum results with little constraints, time, cost and efforts. Furthermore, the study targets banking sector composing of 38 commercial banks attached in Appendix I that have been operationalized for more than 10 years from 2012-2021. Subsequently, the data analysis will accomplish through SPSS to explain the link between the explanatory and explained variable. Moreover, the findings portrayed by multiple linear regression postulated that the autonomous value whenever all factors are held unchanged was 0.033 hence opining that financial performance increased at positive 3.3%. Moreover an improvement in the government revenue by one unit triggered an increment in the financial performance by 1.8% significantly when all determining factors held constant. Additionally, an advancement in the GDP by solitary unit translated to addition of financial performance by 7.6% when all variable are maintained unchanged though insignificant. Additionally, a unitary increment in the government expenditure translated to significant decrement on the financial performance by 0.2% only when all factors are maintained unchanged. Moreover, addition of one unit of debts replicated a decrease in the financial performance by 0.1% which insignificant in the scenario where other factors are held constant. In addition, the banking sector should screen the viable opportunities and invest in high income generating projects. Moreover, analyzing the external environment is a game changer among the commercial since they can plan accordingly and adequately. In addition, keen scrutiny of fast-changing commercial environment can enhance the achievement of long term goals.