Changing Landscape in Credit Management and Loan Performance: The Role of Central Bank Regulations in the Context of Commercial Banks in Kenya
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Date
2020
Authors
Mburu, Irene Muthoni
Mwangi, Lucy Wamugo
Muathe, Stephen M.A.
Journal Title
Journal ISSN
Volume Title
Publisher
HRMARS
Abstract
Commercial banks in Kenya as per the World Bank report recorded higher non-performance
in loans than the standard globally in spite of Kenya having the most stable and developed
banking system in East and Central Africa region. Commercial banks non-performing loans for
five years from 2015 to 2018 averaged eleven percent which was higher than the
recommended rate of one percent. In Kenya, commercial banks’ non-performing loans
remain higher than the recommended rate which could be due to inadequate credit
management practices. The study therefore aimed at examining the moderating role of the
central bank regulations on the relationship between credit management practices and loan
performance. The underpinning theory of the study was the credit risk theory. The study used
explanatory research design and the research philosophy adopted was positivism. The target
population was 44 commercial banks in Kenya and a census approach was used. Both primary
and secondary data were used. Primary data was collected through structured questionnaires
and related to credit management practices while secondary data was obtained from review
of existing bank loan records in relation to loan amount advanced and non-performing loans
for a period of four years from 2015-2018. Multiple regression analysis was used to test the
study hypothesis. The study found out that Central Bank Regulations had no significant
moderating effect on the relationship that exists between credit management practices and
loan performance. Therefore, the study concluded that the moderating role of central bank
regulations could not be confirmed. The study recommended that the central bank of Kenya
to continuously assess and update credit management practices and the central bank
regulations. The Government through regulating bodies should thus establish credit policies
that regulate traditional and emerging credit practices among financial institutions.
Description
Article
Keywords
Central Bank Regulations, Credit Management Practices, Loan Performance, Commercial Banks in Kenya
Citation
Mburu, M. I., Mwangi, L. W., & Muathe, S. M. . (2020). Changing Landscape in Credit Management and Loan Performance: The Role of Central Bank Regulations in the Context of Commercial Banks in Kenya. International Journal of Academic Research in Business and Social Sciences, 10(12), 116– 127.