| dc.description.abstract | This paper investigates whether diversification of income sources for Kenyan banks leads to
better earnings and reduced individual bank and systemic risks. The study seeks to analyze
the extent to which observed shift toward fees income generating activities has improved
bank performance and reduced volatility of revenue. The findings show that there are few
benefits, if any, to be expected from income diversification from traditional banking although
there is growing importance of non-interest income during the study period 2000 – 2010.
The benefits of the evolution of non-interest income do not seem to fully offset the increase in
risk that come with fee based income. A positive correlation between net interest income and
non-interest income seems to exist, a finding that suggests that non-interest income may
not be used to stabilize total operating income. The findings also reveal that lending rates are
significantly correlated with net interest income, and the relationship is negative meaning
that more lending takes place when interest rates are favorable. | en_US |
