Credit Information Sharing and Performance of Selected Commercial Banks in Kenya
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Date
2018
Authors
Oira, Sammy Machoka
Wamugo, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
Many banks in Kenya have been
experiencing poor financial performance.
Most of these financial problems arise from
lack of credit information on the loan
applicants which then affect their ability to
recover both the principle and the interest.
There have been efforts by the Central Bank
of Kenya to advance credit information
sharing on loan applicants among
commercial banks so as to reduce the default
rates among loan beneficiaries. This study
aimed to establish the effect of credit
information sharing on the performance of
selected commercial banks in Kenya. The
specific objectives were; To establish the
effect of competitive information sharing on
performance of commercial banks in Kenya;
to assess the effect of credit scoring on the
performance of commercial banks in Kenya;
to establish the effect of efficiency in the
information gathering process on the
performance of commercial banks in Kenya
and to assess the effect of information
accuracy on the performance of commercial
banks in Kenya. This study employed a
descriptive research design. The study was
anchored on information asymmetry theory,
moral hazard theory and financial
intermediation theory. The population of this
study entailed all the 43 commercial banks
licensed under the banking Act as at 31
December 2015 in Kenya. The study used
primary and secondary data. Primary data
was collected using closed ended
questionnaires administered on drop and
pick method while secondary data was
collected from CBK annual supervision
reports and the banks specific audited
accounts. Data was analyzed using both
descriptive and inferential statistics. The
qualitative data collected was analyzed
using mean, standard deviation, frequencies
and percentages while inferential statistics
including multiple regression analysis was
performed to estimate the changes in
performance following changes in credit
information sharing variables. The study
used tables and charts to present the
analyzed data. From the findings, there exist
a strong correlation between variables. The
study established that the credit information
sharing explained for a large proportion of
changes in the performance of commercial
banks in Kenya. The overall regression
model was significant in determining credit
scoring on credit information sharing and
performance of commercial banks in Kenya
as shown by the value of R2. The study
established that credit scoring system has a
significant effect on capability to repay
loans. The study recommended that credit
scoring system should give information on
borrowers’ capability to repay loans, credit
scorecards tools should be used to assess the
behavior of prospective borrowers while
good credit track record should reduce credit
risks.
Description
A research article published in International Academic Journal of Economics and Finance
Keywords
credit information sharing, performance, commercial banks, Kenya
Citation
Oira, S. M. & Wamugo, L. (2018). Credit information sharing and performance of selected commercial banks in Kenya. International Academic Journal of Economics and Finance, 3(2), 21-43