Determinants of Average Lending Rates among Selected Commercial Banks in Kenya
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Date
2018
Authors
Itimu, Samuel Mwaura
Abdul, Farida
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
Despite liberalization of Kenya’s financial
sector in 1991, Kenya has become less
competitive in terms of affordability of
financial services and access to loans
compared to countries such as South
Africa and Malaysia whose private sector
credit to GDP ratio are above 100 percent
compared to Kenya’s private sector
lending which stands at 40% of GDP.
Financial sector liberalization has led to
increased financial services access as
evidenced by CBK data where 26.4% of
the population in 2006 could access
financial services compared to 66.9% in
2013(CBK) Newsletter No.1 December
2014.This remarkable growth is as a result
of financial innovation including mobile
banking, agency banking and credit
information sharing which has translated
to economic growth but has not led to
matched increased access to credit. High
cost of credit and operational inefficiency
among commercial banks in Kenya limits
the access of loans to the private sector
and individuals which ultimately slows
economic growth and development. The
study is on the probable determinants of
average lending rates among commercial
banks in Kenya which include Bank
Specific factors such as Non-performing
loans, Operating costs, capital adequacy,
and Bank size and liquidity risk. Also
industry factors such as Kenya Banks
Reference Rate and Central Bank Rate are
included in the study. The effect of Credit
information Sharing and Government
Domestic borrowing on lending rates
among commercial banks and intervening
variable inflation be studied. The study
employed a descriptive research design
and the population consisted of eleven
listed commercial Banks in Kenya. The
Target population was staff of the eleven
listed banks working in Credit and Risk
and Compliance departments. A sample
size of 33 was derived from three staff
from credit and risk and compliance
departments of each of the listed
commercial banks in Kenya. Purposive
sampling technique was used to collect
data. Secondary data was collected from
published journals and financial
statements. The financial statements for
the year 2012, 2013, 2014, 2015 and
3rdquarter of 2016 were used. Correlation
and multiple regression analysis was used
to analyze the nature and degree of
relationship between the independent and
dependent variables. Statistical package
for social sciences was utilized to aid in
data analysis. Summary of findings on the
objectives was done, conclusion and
recommendations to various stakeholders
made.
Description
A research article published in International Academic Journal of Economics and Finance
Keywords
determinants, average lending rates, selected commercial banks, Kenya
Citation
Itimu, S. M. & Abdul, F. (2018). Determinants of average lending rates among selected commercial banks in Kenya. International Academic Journal of Economics and Finance, 3(1), 142-158