Benchmaking Practices And Performance Of Commercial Banks In Bungoma County, Kenya

ABSTRACT

The past recent years have seen changes in the Kenyan economy and commercial banks have not been spared from the impact of these changes which includes: interest rate capping; increasing competition from financial technology companies and increased Consumer expectations as well as political interference. These challenges possess financial pressure to the bank hence losses and create risk to Kenya’s financial stability if allowed to persist in the long term. Majority of commercial banks have experienced decline in return on equity for the period 2014 to 2017. Management theories and practice suggest comparison (benchmarking) as the key tool for evaluating and improving organization performance and therefore minimize risk. This study therefore sought to investigate the influence of benchmarking practices on performance of commercial bank in Bungoma County. The specific objectives of the study to address were; investigating the influence of internal, competitive and generic benchmarking on the performance of commercial banks in Bungoma County. The study used descriptive survey design. The target population was 133 which was the total number of managers in Bungoma County commercial banks. This used census approach, as it utilised the entire population in the research. To ascertain the reliability of the instruments, a pilot study was done in Nakuru County. Quantitative data collected using questionnaires was analysed by the use of descriptive statistics and inferential analysis using SPSS (Version 24) and presented through percentages, means, standard deviations and frequencies, percentages and correlation analysis. Tables and figures were used to present data. The findings showed that there was an effective apprenticeship in the bank. The study presented that the on-job training is frequently carried out to all employees and this has led to improved performance. Majority of commercial Banks' strategic Alliance was done with likeminded firms in order to improve performance. Customer value creation found to be done through competitive pricing in the majority of commercial Banks. The findings indicated that there was an effective ICT system adoption in the majority of the commercial Banks and that ICT adoption affected commercial banks performance. Majority of the commercial banks had improved their market share as a result of ICT adoption. The study indicated that the commercial banks studied had experienced competition from number of substitutes available in the market. From the findings, it was established that majority of the commercial banks had experienced increased profitability for the years 2013 to 2017. Based on the findings summary above, it was concluded that there was a strong positive correlation between benchmarking practices and performance of commercial banks. The study concluded that the relationship between competitive benchmarking and performance of commercial banks was positive and significant. The relationship between generic benchmarking and performance of commercial bank was found to be positive and significant. The study recommended that commercial banks should evaluate the way they compete and serve customers in the market. They should aim at attracting customers, satisfying customers and retaining customers through strategic alliances. The study recommended that commercial banks should ensure that there is effective use of ICT system to enhance performance of commercial banks.