Bank Financial Intermediation and Economic Growth in Kenya

Abstract

Financial intermediation of commercial banks promotes economic growth in Kenya by mobilizing funds from areas with surplus and distributes them to areas with less funds thus economic growth is achieved following an efficient financial system of commercial banks. The objectives of the study were to find the effect of commercial bank loans, deposits and assets on the Gross Domestic Product of Kenya. Data was collected from 29 licensed commercial banks from 2011 to 2021. Gross Domestic Product was used to measure economic growth while bank assets, loan value and deposits were used to measure financial intermediation. Data was analyzed using EVIEW 11 SPSS software and a single regression analysis was used in each of the independent variables to determine their effect on the dependent variable. Correlation analysis with p-value < 0.05 showed no significant relationship between Bank loans, assets and deposits with the GDP. The study recommends that CBK to ensure publicity of financial statement of banks on their websites to allow easy access to stakeholders, broad money supply to be taught as a sub-unit in universities since it is a major indicator of financial intermediation, management of commercial banks to ensure that information on number of outstanding loans and active borrowers to be included in financial statements and students to be taught on more tests and methods to analyze data in similar studies as this one.