Financial Inclusion, GDP and Credit Risk of Commercial Banks in Kenya
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Date
2018
Authors
Musau, Salome
Muathe, Stephen M. A.
Mwangi, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
Canadian Center of Science and Education
Abstract
This paper provides an empirical analysis of the synergies and trade
offs between financial inclusion and credit
risk of commercial banks in Kenya. The paper analyzed the effect of financial inclusion on credit risk and the
mo deration effect of GDP on commercial banks in Kenya. Financial inclusion was measured using three
dimensions of bank availability, bank accessibility and bank usage, while credit risk was represented by the non
performing loans ratio. The study was anchore d on financial intermediation theory supported by finance growth
theory and asymmetry information theory. The target population was all the 43 commercial banks in Kenya. The
study used secondary data collected from Central Bank of Kenya annual reports; com mercial banks of Kenya
published audited financial statements and annual data from Central Bureau of statistics of Kenya fo r the period
between 2007 2015. Data was analyzed using descriptive statistics and panel multiple regression analysis. The
results obtained found that bank availability, bank accessibility and bank usage had significant effect on credit
risk of commercial banks in Kenya. GDP growth rate was found to partially moderate the relationship between
financial inclusion and credit risk. From the findings the study concluded that financial inclusion has a
significant effect on credit risk of commercial banks in Kenya. The study also recommended that commercial
banks in Kenya to negotiate with Central Bank and the Ministry of Finance to put policies which support
favorable macroeconomic variables especially GDP which influences the level of financial inclusion and bank
credit risk.
Description
Research Article
Keywords
Financial inclusion, GDP growth rate, Credit risk, Kenya
Citation
International Journal of Economics and Finance; Vol. 10, No. 3; 2018