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This study sought to establish how various credit risk management practices affect performance of commercial banks in Nyeri County in Kenya. Even though commercial banks face several types of risks, credit risk stands out as the most severe. Credit risk is the possibility of loss to the lender on non-performing loans. Financial practice as well as theory provides a scientific process of credit risk management in financial institutions. However, lenders still face loan default and consequently this study sought to find out how those practices affect the performance of commercial banks in Nyeri County, Kenya. A census study was conducted where a population of 86 respondents was targeted comprising of branch managers, credit managers and credit officers. The findings of the study were that all commercial banks had a well written credit policy which is strictly and consistently followed. Only few commercial banks conduct a quantitative credit scoring model. In all banks, initial screening is done by credit officer and approval done at different levels depending on the amount. Majority of the banks check post borrowing activities of the borrower. In conclusion, credit risk management has an effect on loan performance amongst commercial banks. Thus, managers should evaluate more accurately the ability to pay back of a customer since the better the screening the better the performance of commercial banks.
Savings and Credit Cooperative Societies have been recognized worldwide as an important avenue of economic growth and development. They have created a vibrant and dynamic environment hence enhancing economic growth and also plays a significance role in the society by facilitating the provision of financial services to the people through savings and providing credit and investment opportunities to individuals, institution and group members. The objective of the study was to determine the effects of credit risk management practices on the financial performance of Savings and Credit Cooperative Societies in Mombasa County, Kenya. The researcher used descriptive research design in investigating the effects of Credit risk management practices on profitability of Sacco’s in Mombasa County. The study used primary data and secondary data for primary data collection, questionnaires and observations for confirmation of secondary data was used. Secondary data was obtained from websites, published journal articles, policy documents and any other official documents that were found relevant to the study. The study targeted 50 SACCOs in Mombasa County, Kenya. This study focused on the effects of credit risk management on financial performance of SACCOs in Mombasa County. Since only 64.9% of results were explained by the independent variables in this study, it is recommended that a study be carried out on other factors on financial performance of SACCOs in Mombasa County. The research should also be done in other commercial banks or deposit taking SACCOs and the results compared so as to ascertain whether there is consistency on financial performance.
INFLUENCE OF MOBILE-BASED LENDING PRACTICES ON CREDIT CONSUMER BEHAVIOUR IN EMBU COUNTY, KENYA
INFLUENCE OF MOBILE-BASED LENDING PRACTICES ON CREDIT CONSUMER BEHAVIOUR IN EMBU COUNTY, KENYA2020 •
Purpose of the study: This study sought to assess the influence of mobile-based lending practices on credit consumer behaviour in Embu County, Kenya. The objectives were to determine the influence of mobile-based loan application, receipts and repayment practices on credit consumer behaviour. Problem statement: Mobile lenders have exponentially increased in the market. Some of the lending platforms are, however, not regulated by the Central Bank of Kenya and thus operate with potential of exploitation to customers who have shown a great appetite for loan products. Studies have shown the use of available credit products offered as digital finance has not in any way been able to improve consumers' lives and their livelihoods in Kenya. Further, about 1 million credit consumers or borrowers do not understand the applied interest rates and regime but are willing to borrow digitally or via mobile. The mobile-based credit decision is influenced by some activities in the value chain that make consumers make decisions that are not rational. Methodology: A mixed methodology of research was adopted together with a survey design, which was the most appropriate for the methods chosen. The target population of 549,098 people with mobile phones living in Embu County was identified. A sample of 100 respondents was interviewed randomly using a semi-structured questionnaire. Using simple comma-separated values (CSV) file for recording results, Python version 3.7 was used to analyze the data. Results of the study: The results showed all the three variables have a significant influence on credit consumer behaviour. The key findings of this study were loan application practice is the most influential activity in credit consumer behaviour. Additionally, there was a significant number of credit consumers in Embu county, majority who are young male consumers. Conclusion: Cash urgency and speed of the process influence consumers to make decisions that are not rational. Mobile credit consumers are seeking faster and convenient practices FINANCE
Microfinance loans, savings, and other basic financial services are important to the poor. Microfinance differs in key concepts from conventional banking in that it employs different collateral substitutes to deliver and recover loans. Such collateral substitutes are anchored on lending policies and dynamic incentives which allow the loan size to increase over time upon satisfactory repayment, mandatory savings, and regular repayment schedules. Joint liability constraints the group borrowing ability as individuals; interest fees, penalties and commissions on these loans further affect the customer; this calls for prudent credit management from microfinance institutions to minimize the default. This study sought to establish the effect of lending policies on financial performance of microfinance institutions in Kisii County, Kenya with a specific interest on KWFT. The findings will also help the microfinance bank to make effective credit risk policies that will protect its financial performance. The study adopted a descriptive case study research design with a target population of 116 KWFT loan officers. The study found out that financial performance has strong correlation with lending policies which include joint liability (0.754), loan monitoring policies (0.859) and regular loan repayments (0.758). Lending policies explain 76.8% of variance in financial performance. Financial performance improves when lending policies are complimented with other credit risk management approaches as shown on regression model; between financial performance and lending policies Y=-0.158+0.298X1+2.265X2-1.062X3. The study concludes that lending policies namely; group liability, monitoring polices and repayment frequency improves the financial performance of MFIs. The study recommends that these policies be reviewed regularly to fit them to the dynamic lending business.
Commercial Banks as financial intermediaries play a cardinal role in an economy by mobilizing savings, reducing costs of financial transactions and managing risks. Careful management of banks' credit portfolios is therefore essential for their stability as a significant amount of bank revenue is from interest income generated from lending. But over the years decline of loan performance by borrowers is growing and is becoming more complex task. The main objective of this study was to investigate determinants of loan repayment among customer performance of commercial banks in Bungoma County, Kenya. Specifically, the study sought to find out the effect of loan security, on customer performance among customers of commercial banks in Bungoma County. Both descriptive and inferential analysis revealed that all conceptualized predictor variables significantly influenced loan repayment among customers of commercial banks in Bungoma County (the outcome variable). That is; loan security (β=0.551 (0.112) on customer performance. The study concluded that first, commercial banks engaging in viable loan security measures reduce loan delinquency ratios which can consequently positively influence customer performance. The study recommended that first, commercial banks should engage in viable loan security measures meant to reduce loan delinquency ratios which can consequently influence positive customer performance; and secondly, commercial banks should craft feasible book keeping, debt and financial management programs to equip both lenders and borrowers with sound book keeping, budgetary, debt or financial management skills required to boost loan repayment performance.
Credit risk poses a significant exposure not only to the banks but also to the entire economy, which is evident in east Africa financial crises. This is because of the fact that the banking is a vital industry of any economy. There has been a dramatic loss in the banking industry and suddenly announced large losses due to credit exposures that turned sour. This emphasizes the importance of managing the credit risk within the banking sector. Lending is a very profitable activity of the bank since customer pays interest on the amount borrowed. But this profitable activity also has problems which arise as a result of delayance or default in loan repayments which can be so extended and interconnected. The general objective of this study was to evaluate the influence of credit risk monitoring on lending performance of commercial banks in Nairobi County, Kenya. This study used descriptive survey research design and the target population for this study was employees of the 42 commercial banks in operation in Kenya as at 1st January, 2018. Primary data was collected using questionnaires that have both structured and unstructured questions. The researcher analyzed the data using descriptive statistics and logistic regression analysis (binary) was used. The results of the study revealed that the combined effect of credit risks monitoring activities influenced bank lending performance positively. The study concludes that credit risk monitoring activities significantly influence the lending performance of commercial banks and this has affected the performance of the entire sector. The study recommended that KBA and CBK should make it a requirement that borrowers should be submitting reports regularly to the bank on changes in the value of collateral which was used to acquire loan.
Commercial banks in Kenya have suffered significant loan repayment default problems resulting into decreased employment levels and liquidity problems. Interest rate changes have also contributed to non-performing loans. Non-performing loans are associated with bank failures because borrowers do not pay their loans in time which leads to financial crises for commercial banks in Kenya. Due to the nature of their business, commercial banks expose themselves to the risks of default from borrowers and this risk is known as credit risk. If the non-performing loans are kept existing and continuously rolled over the resources are locked up in unprofitable sector thus hindering the economic growth and impairing the economic efficiency. This study sought to establish the relationship between interest rate regulations and non-performing loans on financial performance of commercial banks in Kenya. The study used questionnaires to collect primary data and used secondary data for period 2013 – 2017 from Bank’s Annual Reports. Descriptive research design and census survey method was used whereby all the 43 commercial banks registered in Kenya for period 2013 – 2017 were selected. The target population was 86 officers: 43 bank managers and 43 credit managers of all the 43 commercial banks registered in Kenya. Inferential statistics was used where multiple linear regression analysis was used to analyze the data. The data was presented in tables, graphs and pie charts. The findings of the study revealed that poor credit assessment, unfair competition among banks, willful default by borrowers and their knowledge limitation, fund diversion for unintended purpose, over/under financing by banks, bank size, interest rates changes, growth in loans, inflation ascribe to the causes of loan default and they affect financial performance of commercial banks in Kenya. The study also revealed that there exist a relationship between interest rate regulations and non-performing loans of commercial banks. The study concludes that interest rate regulations contribute to non-performing loans which affects the financial performance of commercial banks in Kenya in terms of ROA and ROE. The study recommends that commercial banks should have a mechanism of identifying loan defaulters and take necessary action, charge their clients interest rate as per the regulations of CBK, enhance regular credit risk monitoring of their loan portfolios to reduce the level of non-performing loans.
SACCOs play a very major role in financial intermediation in Kenya, hence this ensures that the members of these SACCOs are empowered economically and can invest some of their savings into the economy. The purpose of the study was to determine the financial factors of Growth of SACCOs within the County of Mombasa. The target population was SACCOs operating FOSAs within the county of Mombasa and the population was taken from the SASRA website on random basis. The study focused on ninety (90) SACCOs that have been licensed by SASRA. Secondary data was collected using the financial statements of the SACCOs sampled for the last three years. Regression model was used to establish the causal relationship between the variables. The findings revealed that members share deposit and interest income had a negative correlation with the dependent variable financial performance of selected SACCOs in Mombasa County. The study findings further revealed that members share deposits and interest incomes have no significant effect on financial performance of selected SACCOs in Mombasa County. On risk management technique and loans recovery, the study results showed that risk management techniques and loans recovery strategies have a strong positive correlation with the dependent variable financial performance of selected SACCOs in Mombasa County. The study concluded that members’ share deposits and interest incomes have no significant effect on financial performance of savings and credit cooperatives in Mombasa County; risk management techniques and loans recovery strategies have a significant effect on financial performance of savings and credit cooperatives in Mombasa County. Recommendation was that SACCOs should examine other methods to increase deposits level to enable them to lend more and earn more from lending than on members share deposits; that SACCOs should diversify their income streams to include rent incomes from their properties and other assets incomes rather than depend on interest incomes since in Kenya interest rates are regulated; that SACCOs should enhance their risk management techniques to reduce loans default; that SACCOs should continue recovering loans from defaulters by encouraging clients to make partial payments.
International Journal of Current Aspects in Finance (IJCAF)
Loan Repayment and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in Embu County, KenyaMeagre earnings by SACCO’S operating in Kenya has been attributed to challenges of embracing appropriate loan repayment strategies. Though limited studies have been conducted in Kenya to establish the link between loan repayment and financial performance, it is observed that there is no clear understanding on the link between loan repayment and financial performance of SACCO’S operating in Embu County, Kenya thus formed the basis of the study. The study sought to investigate loan repayment and financial performance of SACCO’S in Embu County, Kenya. The specific objectives included; loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics on performance of SACCO’S in Embu County, Kenya. The study employed descriptive research design and targeted a total population of 250 respondents selected from of 10 SACCO’S operating in Embu County, Kenya. Out of the 250 respondents, Slovin’s formula was adopted to select 158 respondents to be the sample size of the study. The study used primary and secondary data. Primary data was collected using questionnaires through drop and pick later method. Secondary data was gathered by a review of existing materials that included financial statements and related empirical studies. The content validity was determined by lecturers that were drawn from department of Accounting and Finance of Kenyatta University and industry experts who were draws from SACCO’s. Reliability of the study was tested using Cronbach Alpha method and values of all the four variables of the study were more than the cut-off point of 0.7 thus were reliable for the study. Statistical Packages for Social Sciences (SPSS) version 24 was applied to analyse quantitative data using descriptive statistics such as mean scores, percentages and standard deviation. Multiple regression was conducted at 95% confidence level and 5% significance level to establish the statistical significance between variables of the study. The findings of the study were presented using tables and graphs. Data analysed revealed that there exist a statistical significant relationship between independent variables (loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics) and dependent variable (financial performance of deposit-taking Savings and Credit Co-operative Societies in Embu County, Kenya). The study concludes that unless SACCO’s embrace models of minimizing financial risks such as loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics models, achieving financial performance will be an uphill task. The study recommends that SACCO’s not only need to focus on non-performing loans but also seek to understand and review loan policies to encourage repayment within the stipulated timeframe.
American Based Research Journal
Effect of Credit Analysis on Financial Performance of Microfinance Institutions in Eldoret Town, Kenya2018 •
Microfinance institutions industry plays a vital role in the economy by giving loans to poor people with the aim of reducing poverty level hence economic growth. A major threat facing microfinance institutions is the increase of Non-Performing Loans (NPL) that leads to the collapse of microfinance institutions. The purpose of this research is to determine the effect of credit analysis on the financial performance of microfinance institutions in Eldoret town, Kenya. The study was founded on the 5C's model of client appraisal. The target population of the study was 25 licensed microfinance institutions in Eldoret town according to AMFI (Association of Microfinance Institutions). A sample of 240 respondents was selected based on proportionate sample size categorized into branch managers, senior credit officers and credit officers using stratified sampling and simple random sampling (SRS).The study used primary and secondary data. Questionnaires were used to collect primary data while secondary data was obtained from the annual performance of the respective institutions financial statements. Data was analyzed and presented using descriptive statistics and inferential statistics. Inferential statistics were used to analyze data using correlation, ANOVA while regression analysis was used to test the effect of the independent variable and dependent variable using statistical package for social sciences (SPSS) version 21. The findings revealed positive and significance relationship between the variable set at P<0.05. Credit Analysis (β=0.591; p=0.000<0.05). The findings will be helpful to the microfinance institutions to be able to understand the effect of credit analysis on the financial performance of microfinance institutions, the credit department of microfinance institutions will be able to know the importance of implementing credit policy. It can be concluded that good credit analysis measures be put in place by MFI's because it influences financial performance hence good health.
International Journal of Management and Commerce Innovations
Effect of Bank’s Lending Behaviour on Loan Losses of Listed Commercial Banks in Kenya2017 •
International Journal of Advanced Research (IJAR)
CREDIT RISK MANAGEMENT AND PROFITABILITY IN SELECT SAVINGS AND LOANS COMPANIES IN GHANA2020 •
Canadian Institute for Knowledge Development (CIKD)
Measuring Credit Risk Management and its Impact on Bank Performance in IranGlobal Journal of Management and Business Research: C Finance
Impact-of-Non-Performing-Loan.pdf2019 •