Effect of bancassuarance on financial performance of commercial banks in Kenya
Over the past decades, fundamental changes in the industry of financial intermediation, such as deregulation and advances in technology, had a visible impact on the provision of financial services. Deregulation, in various parts of the world, has made flexible the provision of financial services and promoted competition among financial institutions. In Kenya, this has seen the entry of Mobile telecommunication companies into banking industry thus limiting commercial banks revenues substantially. One of the most prominent transformations undergone by the financial services industry has been the emergence and expansion of bancassurance (or bank-insurance). Despite the importance of this issue, few empirical analyses have directly assessed efficiency issues in the bancassurance business and, as far as the researcher is aware, none of these focused on performance differences among alternative forms of cooperation between the banking and the insurance industries. This is despite the fact that most of the commercial banks in Kenya are adopting bancassurance services without any tangible effect on their financial performance. The purpose of this study was to establish the effect of bancassurance on financial performance of commercial banking industry in Kenya. This study was a descriptive survey. The target population of this study was the nine commercial banks in Kenya that have taken up bancassurance. Due to the population size of commercial banks in Kenya that have taken up bancassurance, the research took the census approach. The secondary data was collected from the commercial banks audited financial statements and also CBK for the year 2008-2012. Data was analyzed using Statistical Package for Social Sciences (SPSS Version 21.0) program. The data collected was run through various models so as to clearly bring out the effects of bancassurance on bank financial performance. The study concludes that bancassurance has a weak positive but significant influence on the financial performance of commercial banks in Kenya. The study recommends that the study recommends that the bank managers should promote the adoption of the bancassurance to their customers through advertising to its customers most of whom are not insured. Intense market competition between banks has led to a substantial decrease in the interest margins of the traditional banking products. Banks should take advantage of widespread branch network across the country in the distribution of insurance products.