Is Non-Interest Income Saviour of Commercial Banks in Kenya?

Diversification into non-interest income by commercial banks has been born out of the need for banks to improve their financial performance in the wake of declining revenues majorly due to dependence on interest income. Banking amendment act (2016) capped interest rates at 4% on top of the Central bank of Kenya lending rate. Meaning the ability of commercial banks to charge interest income was also capped. I believe payment, transaction processing and advisory (brokerage) services will be the biggest sources of income for banks in the coming years. This research's main focus was investigate how commercial banks are aligning themselves to maintain shareholders desired level of financial performance with the interest rate capping law being the biggest disruption in the industry. The capping of the biggest source of industry income (interest income), will see major alignments in business models, mergers and acquisitions. Banks must anchor their business models on non funded income to remain afloat.

Autorentext

Patrick Ambuka Okello is a financial scholar and enthusiast. The motivation for researching on the contribution of non funded income to commercial banks was to find out how commercial banks are addressing the declining performance in the banking industry majorly as a result of the law capping interest rates enacted in 2016 in Kenya.