Islamic Finance and its Effect on Financial Performance of Commercial Banks in Kenya: A Case Study of First Community Bank Limited

Najma Ibrahim Issack and Laura Nyaloti
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Najma Ibrahim Issack: School of Management and Leadership Management University of Africa, Nairobi.
Laura Nyaloti: School of Management and Leadership Management University of Africa, Nairobi.

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 8, 4587-4597

Abstract: In this study, First Community Bank Limited was used as a case study to examine the goals of islamic finance as they relate to the financial performance of commercial banks. Determine the effect of riba, gharar, and maysir bans on the monetary execution of commercial banks was the explicit aim. The management of First Community Bank Limited and other academics will find the study important. The target population consisted of 106 staff of First Community Bank. The study utilized stratified random sampling, allowing generalizations to be made across a broader population that are statistically valid. Slovin’s Formula was used to arrive at a sample of 84 staff out of a target of 106 staff of First Community Bank. Questionnaires were used as the data gathering tools. The study concluded that the restriction of riba (interest) has an impact on the financial health of commercial banks based on its findings. The majority of respondents concurred that gharar restriction had an impact on the financial performance of commercial banks. According to the research’s conclusions, commercial banks’ financial performance is impacted by the prohibition of gharar. Majority of respondents stated that the ban on maysir (gambling) affects how well commercial banks function financially. The study concluded that the restriction of maysir (gambling), based on its findings, had an impact on the financial health of commercial banks. Majority of the respondents agreed that sharing of business risks influence financial performance of commercial banks. Based on the findings, the study came to a conclusion that sharing of business risks affects financial performance of commercial banks. The response of prohibition of riba (interests) and financial performance of commercial banks. On property rights affect financial performance of commercial banks in Kenya, 3% strongly disagreed, 15% disagreed, 20% were neutral, 23% agreed and 40% strongly agreed. On creating wealth affect financial performance of commercial banks in Kenya, 28% agreed and 37% strongly agreed. On reduction of state resources affect financial performance of commercial banks in Kenya, 25% agreed and 36% strongly agreed. banks.

Date: 2024
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