Influence Of Liquidity Measures On Performance Of Islamic Banks In Nairobi County, Kenya

Abstract

Financial measures are earliest forms of evaluating performance. Financial measures in Islamic banking include better liquidity. Enhancing liquidity is a critical endeavor for businesses, investors, and policymakers. It fosters vibrant markets, supports economic growth, and contributes to financial stability. Islamic banking contributes a paltry two percent of Kenya’s total banking assets. As such, the contribution of Islamic banking to Kenya’s economy is minimal. The performance of Islamic banking to GDP contribution necessitates the need for enhanced liquidity measures to enable the Islamic banks involvement in capital markets, encouraging alternative long-term financing and attracting foreign direct investments. The study investigated the influence of liquidity measures on the performance of Islamic banks. The research was underpinned by the liquidity risk theory. Descriptive research design was employed. This study’s population were the three Islamic banks in Nairobi County. This study used a data collection sheet to gather secondary data from the Islamic banks in Nairobi County. This study used secondary data from the published financial statements of the three Islamic banks in Nairobi County for 5 years, that is the years 2017 to 2021 (making 15 reports). The study revealed a significant and positive correlation between liquidity measures and performance of Islamic banks in Nairobi County. The study recommends that Islamic banks in Nairobi County should prioritize the enhancement of their liquidity position.