Effects of CSR Initiatives on Financial Performance of Commercial Banks in Kenya
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Keywords
Corporate social responsibility, financial performance, return on assets, return on equity, commercial banks, Kenya
Abstract
Commercial banks in Kenya operate in a competitive and highly regulated environment that compels them to balance profitability with societal expectations from stakeholders. In recent years, these banks have increasingly invested in corporate social responsibility (CSR) initiatives to build reputation, strengthen customer loyalty and improve long-term sustainability. However, the extent to which such investments translate into measurable improvements in financial performance remains unclear. This study addresses this knowledge gap, this study evaluated the effects of CSR initiatives on the financial performance of Kenya’s commercial banks. The research is grounded in stakeholder theory and adopted an explanatory research design. A census of all 39 licensed commercial banks was conducted using secondary data from audited financial statements, CSR reports, and CBK disclosures for the data period 2019-2023. Data analysis involved descriptive statistics, correlation analysis and multiple regression to establish the predictive strength of CSR on financial performance. Descriptive analysis revealed that banks implemented CSR initiatives at a moderate level (mean = 2.90), while financial indicators varied, with ROA averaging 2.90%, ROE at 14.99%, and Net Profit at KES 13,818 million, all showing wide disparities across institutions. The correlation analysis showed no relationship between CSR initiatives and financial outcomes indicating that CSR activities did not align with short-term financial performance of commercial banks. However, regression analysis showed a positive and significant effect of CSR initiatives on financial performance (B = 0.105, β = 0.355, t = 2.442, p = 0.020). The study concludes that CSR, when implemented purposefully and aligned with community and economic priorities, contributes significantly to the financial sustainability of commercial banks in Kenya. The study recommends that banks should to re-evaluate their CSR initiatives to enhance their impact.
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Jackline Limo , Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya
Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya
Joab Ooko , Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya
Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya
Loice Koskei , Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya
Department of Finance and Accounting, School of Business, Koitalel Samoei University College (University of Nairobi Constituent College), P.O. Box 5-30307, Mosoriot, Kenya