Factors Influencing Credit Rationing by Commercial Banks in Kenya

Abstract

The objective of this study was to examine the factors influence credit rationing by commercial banks in Kenya. Descriptive research design was used in the study. The target population from which the sample was drawn is Commercial banks within Nairobi region. A representative sample was drawn using the Proportionate Stratified random sampling. Both primary and secondary data was used in the study. Data collected was validated, edited and coded then analyzed using descriptive statistics with the aid of Statistical Package for Social Sciences (SPSS).Data presentation methods used were tables, charts and diagrams. The study established factors that influenced credit rationing by commercial banks in Kenya are loan characteristics, firm characteristics and observable characteristics. Some of the recommendations that the study made were that that it is beneficial for banks to ration credit but it should be done with professionalism and with no biasness, the factors that influence rationing of credit should be evaluated thoroughly by the person in charge and given priority before issuing credit. And the Banks should find out more about credit rationing and how it can contribute to their business growth.