Mortgage Financing And Profitability Of Commercial Banks In Kenya

ABSTRACT

The study sought to determine the relationship between mortgage financing and profitability of commercial banks in Kenya. Lending is one of the main activities of banks in Kenya and other parts of the world. Mortgage loans have become an important aspect of loan portfolio among commercial banks in Kenya, earning commercial banks‟ profits like other type of loans. Profitability, it is always associated with performance and productivity. Mortgage financing over the years has been a preserve for mortgage financing companies but with time, commercial banks have started engaging in mortgage financing. This study was motivated to establish the relationship between mortgage financing and profitability of commercial banks in Kenya. The study sought to answer the following specific objectives to determine how mortgage core savings influences profitability of commercial banks, to establish the relationship between income and profitability of commercial banks, to establish the relationship between economic factors and profitability of commercial banks and to establish how diversification of portfolio influences profitability of commercial banks. The study adopted a descriptive research design for it portrays an accurate profile of situations. The design helped the study in obtaining information concerning the current status of the factors affecting commercial banks mortgage financing. The population of this study comprised of financial managers and credit managers from the mortgage financing institutions in Kenya. The target population of this study was 44 commercial banks in Kenya. The study adopted a census survey of all the banks. The study used primary data and secondary data. The study used a survey questionnaire administered to each member of the sample population. The study administered the questionnaire individually to all respondents of the study. Secondary data was obtained from the individual bank reports and from central bank of Kenya. The study carried out a pilot study to pretest and validate the questionnaire. Quantitative data collected was analyzed by the use of descriptive statistics using SPSS and presented through percentages, means, standard deviations and frequencies. The information was displayed by use of bar charts, graphs and pie charts and in prose-form. This was done by tallying up responses, computing percentages of variations in response as well as describing and interpreting the data in line with the study objectives and assumptions through use of SPSS (version 20) to communicate research findings. The inferential analysis which includes regression and correlation was done to establish the relationship between mortgage financing and profitability of commercial banks in Kenya. The study concluded that commercial banks in Kenya emphases on mortgage financing to improve their profitability. The study established that there is positive relationship between mortgage financing and profitability of commercial banks in Kenya.