Bank Specific Characteristics, Prudential Regulations and Non- Performing Loans of Commercial Banks Listed At Nairobi Securities Exchange, Kenya
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Date
2019
Authors
Chege, Laban Kinyua
Omagwa, Job
Abdul, Farida
Journal Title
Journal ISSN
Volume Title
Publisher
IOSR Journals
Abstract
The Kenyan banking industry have in the recent past reported a high level of non-performing
loans(NPLs). This development has had a negative impact in the industry with key stakeholders raising alarm
over the deteriorating trend in the loan quality. The study sought to assess the relationship between bank
specific characteristics, prudential regulations and non-performing loans among commercial banks listed at
Nairobi Securities Exchange, Kenya. The specific objectives of the study were: to determine the relationship
between bank size, credit size, lending rate, capital adequacy, liquidity and NPLs. Inflation was used as a
moderating variable. The study collected secondary data of nine commercial banks between the period 2012 to
2017. Panel regression with fixed effects method was used for analyzing the collected data at 5% level of
significance. The credit size and liquidity had a p-value of 0.04 and 0.045 respectively indicating a significant
effect on the level of NPLs. Bank size, lending rate and capital adequacy ratio had p-value of 0.560, 0.10 and
0.982 respectively indicating an insignificant effect on the level of NPLs. Inflation, had a significant moderating
effect on the relationship between bank specific characteristics and NPLs (p=0.049) and an insignificant
moderating effect on the prudential regulations and NPLs (p=0.263). The study recommended investment in
human resource assigned to the credit units to mirror the growth in credit size. The CBK should enhance its
credit and liquidity regulation supervision. The regulator should also sensitize the lenders on the effect of
inflation on their internal operations and also create a proactive regulatory environment to prevent factors that
may lead to hikes in liquidity volume.
Description
A research article published in IOSR Journal of Economics and Finance (IOSR-JEF)
Keywords
Bank specific characteristics, prudential guidelines, inflation, Non-Performing loans, Central Bank of Kenya, commercial banks and Nairobi Securities Exchange
Citation
Chege, L. K., Omagwa, J., & Abdul, F. Bank Specific Characteristics, Prudential Regulations and Non-Performing Loans of Commercial Banks Listed At Nairobi Securities Exchange, Kenya.