Credit Risk Management and Profitability of Commercial Banks in Kenya
| dc.contributor.author | Ayieko, Vincent Nyakweba | |
| dc.date.accessioned | 2025-08-01T13:15:33Z | |
| dc.date.available | 2025-08-01T13:15:33Z | |
| dc.date.issued | 2025-05 | |
| dc.description | A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirement for the Award of Degree of Master of Business Administration (Finance Option) of Kenyatta University, May 2025. Supervisor Moses Odhiambo Aluoch | |
| dc.description.abstract | The study investigates the relationship between credit risk management and the profitability of commercial banks in Kenya, with the specific objectives of how credit approval processes, collateral policies, credit restrictions, and solvency affect financial outcomes. Profitability in commercial banks is a key measure of their financial health and sustainability, yet it is often challenged by high levels of non-performing loans, which undermine returns and increase risk exposure. As lending is the core activity of commercial banks, effective credit risk management is vital to safeguard against defaults while sustaining revenue streams. The study employed a descriptive research design, targeting all 38 commercial banks in Kenya, with data collected through a census. Primary data was obtained through detailed questionnaires, while secondary data; covering financial statements and annual reports from 2019 to 2023 was gathered using a structured data sheet. This mixed-method approach was used enabled a robust analysis, combining descriptive statistics of mean and standard deviation while inferential statistics involved the correlation and multiple regression techniques, facilitated by Scientific Package for Social Sciences Version 26. Key statistical tests, including autocorrelation, heteroscedasticity, multicollinearity, normality, and stationarity assessments, ensured data reliability, and validity. The research found that thorough credit approval processes, particularly those emphasizing borrower character and collateral, significantly contribute to profitability. Solvency was confirmed as a key positive contributor to profitability. Credit restrictions also significantly and positively played a critical role by filtering high-risk borrowers and thereby reducing non-performing loans. Ethical considerations were strictly observed throughout the study. Data collection commenced only after obtaining consent from bank representatives and securing ethical approval from the National Commission for Science, Technology, and Innovation. Adherence to confidentiality protocols was maintained, ensuring that data was used solely for the intended research purposes and safeguarding participant privacy. Ethical compliance was critical in upholding research integrity and enhancing the credibility of findings, which can inform policy and theoretical frameworks. The study concludes that commercial banks should strengthen collateral policies and solvency to improve profitability. Future research should explore the interaction effects between credit risk components for a deeper understanding of their combined influence on bank performance. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/31024 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Credit Risk Management and Profitability of Commercial Banks in Kenya | |
| dc.type | Thesis |