The presence of SBs increases rivalry in the banking industry and increases social
welfare as the institution is non-profit oriented.
SBS is less risk-oriented compared to CBS, which are profit-oriented. An interesting
fact is research has shown that if CBS adopt the expense preference behaviour theory,
they may increase their levels of income and profits.
When a bank is competing with the SBs, it is less stable and less profitable.
All these findings are relevant and can yield policymaking in the competition of the CBS and
The expense preference theory is focused on the wellbeing of staff and other functions of the
bank, which are not profit-making. Managers using this kind of theory work with the concept
that profit maximization comes last after the utility of people and other activities of the
financial institution has been taken care of. The expense preference theory is commonly
practised in SACCOs that are interested in improving the social and economic welfare of the
members. Thus, compared to commercial banks that are profit-oriented, the Stockholder
Banks are interested in the general interest of the people. When the SBS show concern and
care for the people, they attract more people to come and save with them in their financial
institution. The expense preference behaviour theory is assumed to create competition in the
market, which reduces customers for commercial banks. However, research conducted has
shown if the commercial bank can engage in expense preference behaviour in some of their
operational activities, they can equally make profits. The banks can create profits by
attracting customers to them who feel the banks are focused on the overall wellbeing of the
society while at the same time earning profit.
Economies of scale theories