EFFECT OF ISLAMIC BANKING ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI CITY COUNTY

Abstract

The objective of this study was to investigate the effect of Islamic banking on financial performance of Commercial Banks Nairobi City County. The specific objectives were; to investigate the effect of interest free transactions on financial performance of commercial banks Nairobi City County and to assess the effect of sharing profit/loss with depositors on financial performance of commercial banks Nairobi City County. The research was carried out in ten commercial banks which were operational in Nairobi City County. The target population was the 195 employees in the ten commercial banks in Nairobi City County. The sample size was 129 employees. The employees were divided into two strata, the middle level and lower cadre staff. Stratified random sampling was used to determine the group that was to be issued with questionnaires'. The study adopted the descriptive survey design. The research instrument that was used during the study was a questionnaire. Both qualitative and quantitative data was collected and analyzed using inferential and descriptive statistics with the aid of Statistical Package for Social Science (SPSS) version 20. It was concluded that Islamic banking has a positive and significant effect on financial performance of commercial banks in Nairobi City County. It was recommended that there is need for creation of awareness on Islamic banking so that the unbanked population can also be captured and this would improve the financial performance of commercial banks. The results were presented in form of tables. Key Words: interest free transactions, profit and loss sharing, Islamic Banking CITATION: Odongo, A. E., & Muchelule, Y. (2019). Effect of Islamic banking on financial performance of commercial banks in Nairobi City County. The Strategic Journal of Business & Change Management, 6 (2), 2191 – 2207.