Business Process Re-Engineering And Financial Performance Of Tier One Commercial Banks In Kenya

ABSTRACT

Financial performance of commercial banks dwells entirely on generated returns of assets from operations whereas loan portfolio falls as a critically valuable asset that unfortunately exposes the institution to financial risks. Business Process Reengineering is a management practice that aims to improve the efficiency in the business processes. Commercial banks seem to have slowed down in Re-engineering making business processes still to be costly and slow. Commercial banks across the world have always embraced business process reengineering as a strategy to change on their business processes and procedures hence improving on their financial performance. Commercial banks in Kenya are faced by intense competition from money transfer platforms such as Mpesa. Therefore this study sought to examine BPR on financial performance of tier one commercial banks in Kenya. The specific objectives were., to establish the effect of internet banking, agency banking, mobile banking and deposit taking automated teller machine on financial performance of tier one Commercial banks in Kenya. The study adopted descriptive research design. The target population for this study were staff in Tier one Banks, focussing on 51 business development managers within their headquarters in Nairobi. Census technique was used to incorporate the entire target population. The study used primary data which data was collected by use of structured and semi-structured questionnaires. The questionnaire's reliability was statistically measured by measuring the internal consistency while the validity was enhanced by supervisors who acted as experts in assessing the questionnaire’s content. The data collection process began by getting a formal letter from the university which helped the researcher to get NACOSTI approval of data collection. The letter together with the consent statement was then presented to the management of the banks as a means of seeking authority to gather data from their institution. The quantitative data was analyzed using the descriptive and inferential statistics using SPSS Version 24 software. The study indicated that there is a positive significant relationship between internet banking and financial performance of tier one Commercial banks with a regression coefficient of 0.241.The relationship between agency banking and financial performance of tier one Commercial banks was established to be positive, and statistically significant (r = 0.518; p=0.011). The study also found that there existed a positive, moderate statistically significant relationship between mobile banking and financial performance of tier one Commercial banks (r = 0.563; p =0.014). The study established that a positive, strong and statistically significant relationship existed between adoption of ATM and financial performance of tier one commercial banks in Kenya (r = 0.449; p =0.021). The researcher recommended that commercial banks need to emphasize the use of internet banking as this will enhance banks growth and customers saving on much time which they could have wasted on queues to be attended the traditional way. The study further recommends that customers should be enlightened on the operation of agency banking in order to enhance their confidentiality. The researcher further recommended that there should be frequent interaction among between top management team members this will enable them to achieve timely information with regards to organizational business, thus to plan and deployment IT to align with business process. The researcher suggested that further studies should be conducted on business process re-engineering on financial performance of other financial institutions such as Microfinance institutions and Saccos in Kenya.