Factors influencing growth of client base of fully fledged Islamic banks in Kenya.

Abstract

The prospective clients to Islamic Banking banks seriously consider whether the bank complies with Shariah principles in all its banking activities. The phenomenal growth of Islamic finance has resulted into customization of products and service by conventional banks. This has necessitated the critical need for the potential customers to have adequate information to make decisions on whether to invest in Islamic Banking. Further, since inception Kenya in 2008; Islamic Banking has only two banks, which is relatively small terms with Islamic Banking institutions. The disparity between the current state of Islamic Banking in Kenya and its potential raises questions about constraints to the growth of client base in Kenya, putting the growth of clients in the Islamic Banking at stake. However, there exists insufficient literature on growth of the client base as being influenced by; Shariah compliance, financing options, customer satisfaction and product quality jointly, which motivated the need to conduct this study to fill this gap. The general objective of the study was to assess the factors influencing growth of client base of Islamic banking in Kenya. Adescriptive research design was used and data was collected from the two main Islamic banks in Nairobi, Kenya. The study target population was the 108 staff of the 2 IB banks in Nairobi,Kenya. The data had a sample population of 85 respondents obtained using Krejcie and Morgan (1970) formal and selected using stratified random sampling, the data was analyzed using descriptive statistics with assistance of Statistical Package for Social Scientists (SPSS)ver. 20. The study established that the growth of client base in IB in Kenyan fully pledged Islamic banks is moderate. The study concludes that Shariah compliance moderately influences the growth of Islamic Banking in Kenya; financing options moderately influenced the growth of Islamic Banking in Kenya; customer satisfaction moderately influences the growth of Islamic Banking in Kenya; and product quality moderately influences the growth of Islamic Banking in Kenya. The study revealed that a 0.05, level of significance, Shariah compliance, financing options, customer satisfaction, and product quality are strong determinants of growth of Islamic Banking in Kenya and that 66.80% of change in growth of Islamic Banking in Kenya for fully fledged IBs is explained by these factors. The study recommends; the Islamic Bank in Kenya should fast track their promotion and build strategic inroads for the Shariah compliant product by laying more emphasis on training, advertising and establishing a firm legal framework to support these products. The study further recommends that the Islamic Banking fraternity in Kenya should create public awareness to the general public of the financing options available in their banks; review their services and products to a competitive level as they participate in corporate social responsibility and they design and develop cost effective and beneficial product. The service delivery should be fast speed, efficient and friendliness and the products should according to Islamic law only(Halal).