The Effect of Real Estate Finance on the Financial Performance of Listed Commercial Banks in Kenya: A Panel Evidence
Journal of Finance and Accounting
Volume 3, Issue 4, July 2015, Pages: 61-68
Received: May 22, 2015; Accepted: May 28, 2015; Published: Jun. 9, 2015
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Author
Fredrick Onyango Odhiambo, Department of Research, Research Pro Solutions, Nairobi, Kenya
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Abstract
Over the years, real estate financing has been a preserve for mortgage financing companies. With time, commercial banks have started engaging in mortgage financing. With the rising non-performing loans among Kenyan banks, mortgages have seen as a safer bet to improve the loan portfolio performance. The study sought to investigate the effect of real estate finance on the financial performance of listed commercial banks in Kenya. Data for nine listed commercial banks was collected for the period 2009 – 2013 from the annual reports of the respective banks. Panel regression analysis was employed on the collected data. The results showed that real estate finance did not have a significant effect on the financial performance of listed commercial banks. Foreign ownership, market structure, cost of bank operations, and the size of the bank significantly influenced bank performance. The study concludes that real estate finance does not influence the financial performance of listed commercial banks. It is recommended that the Central Bank of Kenya (CBK) and stakeholders in the housing sector strategize to improve uptake of affordable mortgage loans in order to improve the overall performance of banks. This study contributes to literature by providing the link between real estate financing and the financial performance of banks from a developing country’s perspective in Sub-Saharan Africa where housing demand is on the rise and therefore offers enormous opportunity for rapid growth for banks. Further areas for research are recommended.
Keywords
Real Estate, Mortgage, Central Bank of Kenya, Nairobi Securities Exchange, Kenya
To cite this article
Fredrick Onyango Odhiambo, The Effect of Real Estate Finance on the Financial Performance of Listed Commercial Banks in Kenya: A Panel Evidence, Journal of Finance and Accounting. Vol. 3, No. 4, 2015, pp. 61-68. doi: 10.11648/j.jfa.20150304.11
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