Credit Risk Management And Financial Performance Of Selected Commercial Banks In Kenya

Abstract

The study sought to determine the impact of credit risk management on financial performance of selected commercial banks in Kenya. Empirical evidence indicates that the effects credit risk management on financial performance of commercial banks in Kenya are positive.The study employed descriptive research design while probability method of sampling was used to obtain a sample of 42 respondents from five banks. Data was collected using questionnaires. The study found that debt recovery process does not significantly affect bank performance whereas loan appraisal process, lending requirements and credit policies were found to have a significant effect on bank performance. The study concluded that the banks need to maintain credit risk exposure within acceptable parameters to maximise a bank’s risk adjusted rate of return. Based on the findings, the study made recommendations to commercial banks management, academicians and policymakers. The study recommended that commercial banks in Kenya should put stringent measure when conducting loan appraisal process and ensure that officers responsible should adhere to all the lending requirements stipulated in order to enhance financial performance. Future researcher should focus on the challenges commercial banks face when implementing credit risk management strategies.