RESEARCH PROJECT

CHALLENGES FACING THE PERFORMANCE OF COMMERCIAL BANKS IN KENYA
A CASE STUDY OF CO-OPERATIVE BANK OF KENYA

1.0 INRODUCTION 2.1 Background of the Study
Commercial banks are institutions which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals, yet some may be members of the Federal Reserve System. While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.

2.2 Profile of the Co-operative Bank of Kenya
The Co-operative Bank of Kenya Limited ('the Bank') is incorporated in Kenya under the Company's Act and is also licensed to do the business of banking under the Banking Act. The Bank was initially registered under the Co-operative Societies Act at the point of founding in 1965.

This status was retained up to and until June 27th 2008 when the Bank's Special General Meeting resolved to incorporate under the Companies Act with a view to complying with the requirements for listing on the Nairobi Stock Exchange (NSE). The Bank went public and was listed on December 22 2008.

Shares previously held by the 3,805 co-operatives societies and unions were ring-fenced under Coop Holdings Co-operative Society Limited which became the strategic investor in the Bank with a 64.56% stake.

The Bank runs three subsidiary companies, namely:

1. Kingdom Securities Limited, a stock broking firm with the bank holding a controlling 60% stake;

2. CoopTrust Investment Services Limited, the fund management subsidiary wholly-owned by the bank; and
3. Co-operative Consultancy Services (K) Limited, the corporate finance, financial advisory and capacity-building subsidiary wholly-owned by the bank.

Or

Co-operative Bank of Kenya Ltd is a Kenya-based bank, which provides general banking services for individual clients, corporate customers and co-operatives. The Bank’s portfolio of products includes current and deposit accounts, cards, money transfers, as well as short and long term loans, among others. It also delivers financial advisory and consultancy services through its subsidiary companies. The Bank operates through several subsidiaries, including Co-optrust Investment Services Limited, which is the fund management subsidiary, Co-operative Consultancy Services Kenya Limited, which offers financial advisory services, as well as Kingdom Securities Limited, which provides stock broking and investment advisory services.

The bank was established in 1965, initially as a cooperative society. The banking license was granted in 1968. The Kenya Government directed all cooperative societies in the country to transfer their deposits to the Cooperative Bank of Kenya and that all cooperatives buy the bank's shares. In 1977, the bank opened its first subsidiary: Cooperative Finance Limited. In 1989, the bank converted to a fully fledged commercial bank and increased its products menu. In 1998 the bank's headquarters were relocated following destruction of the original premises by the bombing targeting the nearby Embassy of the United States of America. That same year, the bank became an agent of the money-transfer service company Money gram. In 2002, the bank's headquarters returned to Cooperative Bank House following renovations. In 2008, the bank listed on the Nairobi Stock Exchange, where its shares trade under the symbol: COOP

Ownership
The bank's stock is owned by the following corporate entities and individuals: 1. CoopHoldings Cooperative Society Limited 64.56 2. Over 111,7oo “other” Investors 35.44
Total 100.00 CoopHoldings Cooperative Society Limited is a holding company owned by the cooperative societies within Kenya, who jointly own a controlling majority of shares totaling almost 65% of the total. The remainder is owned by individual and institutional investors through the Nairobi Stock Exchange.

Branch Network
As at February 2012, Cooperative Bank of Kenya was maintaining 90 branches country wide.

2.3.1 Cooperative Bank Organization Structure 2.3 Statement of the Problem The establishment of Commercial Banks in Kenya was meant to provide Banking Services to the country. Proper safeguarding of monies was needed and provision of facilities and advice was also essential. However, most of these services were available within the boundaries of private individuals. While cooperative Bank of Kenya has succeeded in bringing banking services to Kenyans, there are many outstanding problems in the banking industry sectors. Concerns have been raised on Staff Training, Information Technology, Government Regulations, Staff Motivation and Competition from other banking sectors. Therefore, this study addresses the challenges facing the performance of commercial banks to know more these short comings. 2.4 General Research Objective The purpose of the study was to establish the challenges facing the performance of commercial banks in Kenya either directly or indirectly. 2.5.2 specific Objective of the Study i) To establish the effect of ii) To address the effect of IT on the commercial bank in Kenya iii) To find out the impact of government regulations on the commercial bank in Kenya iv) To analyze the effect of completion from other banking institutions (sectors) to commercial bank in Kenya

2.5 Research questions 2.6.3 How does staff training affect the performance of commercial banks in Kenya? 2.6.4 How does the Information Technology affect the performance of the commercial banks in Kenya? 2.6.5 How does the government regulation affect the performance of commercial banks in Kenya? 2.6.6 How does competition affect the performance of commercial bank in Kenya? 2.6.7 How do lack of staff motivation affect the performance of commercial bank in Kenya 2.6