Cost Leadership Strategy and Mortgage Performance of Banking Institutions within the Mortgage Industry in Kenya

Samuel Omondi Okelo, Dr. Daniel Wanyoike, Dr. Joel Koima and Dr. Patrick Kibati
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Samuel Omondi Okelo: Ph.D Student, Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya,
Dr. Daniel Wanyoike: Ph.D, Senior Lecturer, Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya
Dr. Joel Koima: Ph.D, Senior Lecturer, Kabarak University, Kenya
Dr. Patrick Kibati: Ph.D, Senior Lecturer, Kabarak University, Kenya

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 7, 1-16

Abstract: This study sought to determine the influence of cost leadership strategy on mortgage performance of banking institutions within the mortgage industry in Kenya whilst assessing the moderating effect of bank size measured using total net asset base and branch network. About 83% of lending to the mortgage market was carried out by only 8 out of the 39 registered banks as at December 2022. The study was based on the theories of Porter’s Generic Strategies and Resource-Based View (RBV) of competitive advantage. To achieve the research objective, a sample of 30 commercial banks was picked out of the entire accessible population of 39 banking institutions. Respondents from the banks’ offices in Nairobi, Mombasa, Nakuru, and Kisumu were considered for the study. Questionnaires, with 5-point Likert-scale responses were administered to the respondents. There were five respondents drawn from the mortgage experts in each bank making 150 respondents with a response rate of 78.7%, or 118 questionnaires being returned. The data gathered was presented using descriptive statistics such as mean, standard deviation, and frequencies to measure central tendency and dispersion. From the linear regression conducted, cost leadership strategy explained 17.7% of variation in mortgage performance of banking institutions within the mortgage industry in Kenya. Regression results indicated that cost leadership had statistically significant positive influence on mortgage performance. Bank size significantly moderated the relationship between cost leadership and mortgage performance. These were justified by significant p-value that was less than 0.05. As a result, the study rejected the null hypotheses. The study recommends that banks should focus on increasing their net asset base prior to the adoption and implementation of cost leadership strategy. The Central Bank of Kenya as the industry regulator should also develop measures that encourage fewer banks with large asset bases to enhance overall mortgage performance.

Date: 2024
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