Credit Information Sharing and Profitability of Commercial Banks in Nakuru County, Kenya

Thumbnail Image
Ngima, Miriam Mumbi
Journal Title
Journal ISSN
Volume Title
Kenyatta University
The banking sector over time has been facing various issues of achieving wide ranging information on their customer’s payments history to be used in their process of accessing borrowers. Theinformation sharing aims at providing information that is very accurate, latest updates and gives instant information on borrowers who have potential. This ensures that it is cost efficient and easier to assess the risk and thus managing it, thus enabling reduction of the involvement of unprofitable business and instead result in improvement of client portfolio profitability of the company and also quality. The study focused on analyzing credit information sharing effect on Commercial banks’ profitability in Nakuru County. The research’s objectives revolved around establishing the effects of borrowers credit history information sharing, collateral information sharing, customer identification information sharing and profitability of Commercial banks in Nakuru County. The research was supported by adverse selection, the theory of delegated monitoring and moral hazard theory. 32 commercial banks in Nakuru County were examined while the unit of analysis was the 32 heads of credit departments among the banks. A descriptive research design was employed and since the population was small, a census was done. The study used both structured and unstructured questionnaires with closed and open-ended questions to gather relevant data. The quantitative data gathered was analyzed by use of descriptive statists. SPSS was used in capturing and analyzing data. A multiple regression therefore was applied in determining the linkages among the variables in the study. The analyzed data was effectively presented through tables, frequencies, pie charts, and graphs. The research conclusion that credit information sharing positively and significantly affect profitability of commercial banks in Nakuru County. Also, borrower’s credit history information, credit information sharing cost, customer identification information and collateral information sharing had a significant extent influenced commercial banks’ profitability in Nakuru County. The credit information sharing enhanced banks’ ability to get data on loan security, guarantors and other forms of collateral to reduce credit default. It was concluded that CIS enabled banks to identify, regulate and avoid clients with poor credit history. The research recommendation is that banking institutions need to have their own client credit history records to supplement those by the CRBs. The banks need all to be enrolled with all the registered CRBs in Kenya to enable access sufficient client information before extending credit. The research further puts the recommendation that the banks need to invest and put more focus on customer database for easy identification of customers, their collateral and credit history.
A Research Project Submitted to the School of Business in Partial Fulfillment of the Requirements for the Award of Master of Business Administration Degree (Finance) of Kenyata University, September, 2020
Credit Information, Profitability, Commercial Banks, Nakuru County, Kenya