Factors Affecting Strategic Performance of Islamic Banks in Kenya: A Case Study of First Community Bank

Abstract

In Kenya there are only two (fully) Shariah compliant banks First Community Bank being one of them, hence still a new phenomenon. There is therefore a large untapped market for Islamic banking leading toeven convectional banks in Kenya to embraced Islamic banking for instance: Kenya Commercial Bank, Barclays Bank, Equity and Chase Bank all have shariah compliant products. Banking industry in Kenya is very competitive with FCB facing major challenges which affect its strategic performance. The overall objective of this study was therefore identifying the factors affecting the strategic performance of FCB that was guided by the following objectives: Determining how competitive strategies affect strategic performance, determining how strategic leadership affects strategic performance and determining how strategic Innovativeness affects strategic performance. The study employed descriptive research design because the research objective was to provide systematic description that is as factual and as accurate as possible. The target population was 150 respondents composed of employees in various management levels. A Sample size of 45 respondents was selected using 30% of the population as recommended by Mugenda and Mugenda (2003). A representative sample size was selected using simple stratified random sampling and Data was collected using Questionnaires which were administered to the respondent's and analyzed using Multiple regression model so as to determine whether the sets of independent variables together predict the dependent variable. The refined quantitative data was analyzed using statistical package for social sciences version 17.0 and data was presented using percentages and frequency tables. The study found out that Strategic Leadership had highest influence on Strategic Performance of FCB followed by Competitive Strategies this was largely attributed to possibility that product differentiation is becoming a key competitive edge across the banking sector. Strategic Innovativeness was third, this could be attributed to possibility that innovation is a new concept among many in FCB but which is proving to be a critical factor in the sector. The study recommends FCB should equip itself with knowledge on strategic innovativeness to shield itself from growing competition by developing a different way of using its resources. The study further recommends that FCB should have a reference bureau were they can share information internally with its staff and clients to foster competitive strategies.