Risk Management and Level of Performance of Unsecured Loans in Commercial Banks in Nanyuki Town, Kenya

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dc.contributor.authorKariu, Joseph King’ori
dc.contributor.authorMungai, John
dc.date.accessioned2020-10-29T12:19:38Z
dc.date.available2020-10-29T12:19:38Z
dc.date.issued2018
dc.descriptionA research article published in International Academic Journal of Economics and Financeen_US
dc.description.abstractBanks have to manage more types of risks in order to maximize the shareholders’ wealth. Kenyan banks have witnessed increasing non-performing loans. The liberalization of interest rate controls, the privatization of publicly owned banks, and the expansion on the variety of financial instruments, provided new business opportunities for banks but they also increased the need for proper risk management systems to be put in place in order to control the risks and uncertainties deriving from these changes. The gross nonperforming loans (NPLs) increased by 6.6 percent in the first quarter of 2017. The study focused on the effect of risks management on performance of unsecured loans in banks. The objective of the study was to establish the effect of information technology on performance of unsecured loans. The study was anchored in the information asymmetry and technological determinism theories. The study used a descriptive cross sectional research design. Commercial banks in Nanyuki town were targeted. Branch managers and departmental heads were the respondents in the study. The study used purposive sampling where all 12 banks and 60 respondents were involved in the study. A self-administered questionnaire was used to collect data. Descriptive statistics such as frequencies, percentages, mean and standard deviation were used to organize findings. Regression analysis was conducted to determine the statistical significance of the attempted prediction between risk management and performance of loans among commercial banks. The tests were performed the help of SPSS software at 95% confidence level. Findings were presented in form of tables and figures. The study found that that information technology was used in risk management to a large extent. Regression analysis showed that there was a strong positive correlation (r=0.837) between risk management and performance whereby 68.4% of performance of unsecured loans in commercial banks in Nanyuki town, Kenya could be attributed to risk management. There was statistically significant relationship (F(4,7) = 4.394, P=0.004) between risk management and performance of unsecured loans in commercial banks in Nanyuki town, Kenya. Information technology (p=0.044), was statistically significant. The study concluded that risk management is vital to performance of unsecured loans in commercial banks. This relationship is driven by utilization of information technology which enable the bank assesses and predict risk and therefore employ corrective and mitigation strategies to avoid default. The researcher recommended that commercial banks should make greater investments in information technology in risk management especially in the area of data mining.en_US
dc.identifier.citationRisk management and level of performance of unsecured loans in commercial banks in Nanyuki town, Kenya. International Academic Journal of Economics and Finance, 3(2), 370-384en_US
dc.identifier.issn2518-2366
dc.identifier.urihttps://www.iajournals.org/articles/iajef_v3_i2_370_384.pdf
dc.identifier.urihttp://ir-library.ku.ac.ke/handle/123456789/20744
dc.language.isoenen_US
dc.publisherInternational Academic Journalsen_US
dc.subjectinformation technologyen_US
dc.subjectperformance of loansen_US
dc.subjectunsecured loanen_US
dc.subjectrisk managementen_US
dc.titleRisk Management and Level of Performance of Unsecured Loans in Commercial Banks in Nanyuki Town, Kenyaen_US
dc.typeArticleen_US
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