EFFECT OF CAPITAL ADEQUACY ON FINANCIAL PERFORMANCE OF ISLAMIC BANKS IN KENYA
Abstract
The study's objective was to ascertain the impact of capital sufficiency on the financial performance of Islamic banks in Kenya. efficiency structure theory was used as guiding theory for the study. The study's research design used was causal research design. The five commercial Islamic banks in Kenya comprised the research population. A census study was used because the population was manageable in size. The study was conducted from 2017 to 2021 during a period of 5 years. Secondary data was used in this study. The Central Bank of Kenya and the Islamic banks' audited yearly financial accounts provide the secondary data for this. Regression, correlation, and descriptive statistics were used for data analysis. Due of the panel structure of the data, STATA was the program used. The study found that capital adequacy (CAR) was positively correlated to changes in financial performance. Based on the study's findings that there was a strong and positive correlation between ROE and capital sufficiency, commercial banks in Kenya should make sure they are in compliance with capital adequacy regulations. The study recommended that commercial banks in Kenya invest more on reducing the total operating expenses for this would help in increasing the level of operating income.
Key Words: Capital Adequacy, Islamic Banking, Capital Sufficiency
CITATION: Dahir, A. M., & Thuo, A. (2023). Effect Of Capital Adequacy On Financial Performance Of Islamic Banks In Kenya . The Strategic Journal of Business & Change Management, 10 (2), 1425 – 1434.
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i2.2675
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