- June 7, 2016
- Posted by: admin
- Category: Financial Sector Management
By Peter Kariuki Gatere
2007
This study examines outsourcing in the Kenyan banking sector. In particular, the study analyses the perceived benefits and risks associated with outsourcing.
A questionnaire was designed and sent to forty commercial banks operating in Kenya. Descriptive statistics was utilised to analyse the data. The results show that Automated Teller Machine (ATM) services were the most outsourced function in the sector while customer account processing was the least outsourced function. Banks associate outsourcing activities with high reputational, operational, strategic and contractual risks. Outsourcing benefits highlighted are: freeing of resources, cost reduction, access to specialised vendors, focus on core competence, flexibility and improved services.
Results of logistic regression indicate that bank size measured as total asset is significantly associated with outsourcing decisions. Bank performance measured as Return on Assets and ratio of Non-Performing Loan (NPL) is not statistically associated with outsourcing decisions. Similarly, banks’ wage bill and total operational expenses are not significant determinants of outsourcing decisions. The findings have regulatory policy implications, and in particular the urgent need for formulating a guideline to regulate the apparent proliferation of outsourcing practices in the Kenyan banking sector.