Factors Contributing to Non-Performing Loans in Commercial Banks in Kenya
Journal Title: Scholars Journal of Economics, Business and Management - Year 2014, Vol 1, Issue 6
Abstract
This study focuses on assessment of factors contributing to non-performing loans (NPLs) in commercial banks in Kenya. The 1990s and the preceding years trend of NPLs was increasing resulting to collapse of many banks while several were put under statutory management. The survivor banks and those formed after learnt that poor loan management was a major cause of the heavy blow. While the borrowers are to blame, the management of the failed institutions must share the blame because of instituting poor lending practices, as some lacked prudent innovative methods of managing NPLs. Improved credit risk management has however reversed the trend of NPLs. Nonetheless the percentages gross NPLs to gross loans are still high and may cause closure of more banks. The objectives of this study was to establish whether risk assessment methods, the magnitude of lack of awareness by borrowers on products being offered, risk management methods ,economic conditions and technological obsolescence contribute to NPLs. To achieve these objectives primary data was collected by administering questionnaires to credit section staffs of selected banks. Data was analyzed using spearman’s correlation coefficient statistical method and was presented by tables. The findings emerged that among the five factors tested risk assessment methods had the highest correlation coefficient hence the main contributor to NPLs, followed by lack of awareness by borrowers on products being offered, while risk management methods had minimal share. The findings will provide banks management with increased knowledge on exposure to credit risk and control of NPLs hence increased profitability. Keywords: Loan, Non performing loans, borrower, commercial bank, central bank of Kenya, default risk.
Authors and Affiliations
Irene Njeri Esther
Keywords
Related Articles
- EP ID EP384141
- DOI -
- Views 101
- Downloads 1
Research on Relationship between Agricultural Pollution and Economic Growth Based on the EKC in Chengdu
The relationship between agricultural environmental pollution and economic development has aroused the concern of theorists and practitioners, as it is directly related to agricultural economic growth and country's grain...
Origin of poverty in industrialized countries
The possible reasons of poverty in industrialized countries are considered in article on the example of Russia. The model is built on the principles of sociomechanics that use the representation of people as objects with...
How Are Welfare Levels Affected by Changing Transaction Efficiencies? -A Theoretical Model for Dual Opening up and Unbalanced Development
Abstract: In this theoretical study, we revisit the old Ricardian model of comparative advantage. Following an inframarginal methodology, we build an extended theoretical model based on the concepts of comparative advant...
A Study on Determinants of Capital Structure in Andrew Yule & Corporation Limited in India
The capital structure is fundamentally the forms of acquiring the permanent long term financing of firm. Although there has been abundance of research focusing on the most important determinants of capital structure. Thi...
The Place of Employee Appraisal and Rewarding in Organizational Change Management: Lessons from Telkom Kenya
Abstract:This paper postulates that due to the competitive environment within which most organizations have to operate in, there has been a rapid and, arguably, haphazard implementation of organizational change. The need...