Download or read book Effects Of Credit Default On Performance Of Commercial Banks In Kenya written by Teclah Tuwei and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the years, financial institutions have faced difficulties for a number of reasons, but the major cause of serious banking problems continues to be directly related to credit defaults as seen in the large portfolio of nonperforming loans in the different banks in the world. Credit being the main earning asset of a bank, its default affects commercial banks' performance by reducing profits and increasing the costs of operation. Among the effects of credit default rated highly include: reduction of profits, increased costs of operation and the slowing down of economic growth. Outright default, exposure position and inability of customer to finance the debt due to eventualities not foreseen at the time of the contract are the major causes of Credit default. To mitigate this risk bank management should ensure that superior strategies for lending, managing and recovery of credit are up and running and must be continuously improved. This is a resourceful book for all financial Policy Makers, Bankers, Insurance firms and Scholars and Researchers as a reference point for further research and knowledge generation

Download or read book Determinant of Loan Default and Its Effect on Financial Performance of Commercial Banks in Ghana A Case Study of Fidelity Bank Limited written by Anthony Abaidoo and published by GRIN Verlag. This book was released on 2017-11-27 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (postgraduate) from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, , language: English, abstract: The main purpose of this study was to examine the determinants of loan default and its effects on financial performance of commercial banks in Ghana by using Fidelity Bank Limited as a case study. The study employed quantitative and qualitative research techniques as the research design. In achieving the research objectives primary and secondary data was used. The primary data was collected through a well structured questionnaire. Simple random technique was used to select 120 loan clients and a purposive sampling was used to select a credit staff. The data was collected from four branches of Fidelity Bank in the Brong Ahafo Region of Ghana. It was realized that the delays in loan approval, poor management, poor credit appraisal and diversion of loans are the main determinants of loan default in Fidelity bank. The study also found that SME clients (49.5%) defaults more than agric, personal and salary loan clients. The major cause of loan default according to the findings of this study was decrease in demand of goods and service (16.1%) sold by the loan clients. Again, it was realized that loan default has a negative impact on profitability. It is recommended that the following measures should be implemented to reduce the rate of loan default; good credit structuring, consistent monitoring, sound credit risk policies and standards, quality analysis, well trained staff, good corporate governance system, independent credit assessment, rescheduling and provision of additional funds.

Download or read book The Impact of Credit Information Sharing on the Level of Non performing Loans of Commercial Banks in Kenya MBA Thesis a Ccompanied by a CD ROM written by and published by . This book was released on 2014 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study was to assess the impact of the credit reference bureaus on non-performing loans of commercial banks in Kenya. The research objectively sought to find out the impact of introduction of Credit Reference Bureau (CRB) on non-performing loans in commercial banks. Specifically the study sought to answer the following questions; what is the extent of usage of Credit Information Sharing in Commercial Banks of Kenya? And how does sharing of customer credit information affect the non-performing loans in Commercial Banks of Kenya? This study may be useful to Commercial Banks in Kenya as it may help the banks in formulating effective policies related to full file credit access in Kenya, to the borrowers at it provides knowledge on the use of positive information shared by the commercial banks to engage the lender on the pricing as the credit score becomes a bargaining power. It may be useful for the government as it may aid in policymaking regarding access to credit and other regulatory requirements of the commercial banks as well as benefit researchers and academicians as it will be added to the existing body of knowledge on credit default risk management. The scope of this study focused on commercial banks with branches in Nairobi County. The research design for this study was descriptive survey while the population of interest consisted of 43 financial institutions operating in Nairobi city of Kenya. Out of the 43 banking institutions only 30 were selected to form the sample through Cluster sampling. Primary data was collected by administering open and close-ended questionnaire to the respondents, which was administered through drop and pick method and was self-administered to reduce interviewer bias. The data collected was cleaned then coded and checked for any errors and omissions. Frequency tables and percentages were used to present the findings. Responses in the questionnaires were tabulated, coded and processed by use of a computer Statistical Package for Social Science (SPSS) version 17.0 programme to analyze the data. The findings were that, all banks had challenges of non-performing loans. Sharing of customer credit information affected the Non-performing loans as it helped the banks to decline loaning chronic defaulters; Including all credit history from other credit suppliers (positive information) would increase credit approval by commercial banks, while low default rate would result from lending to borrowers based solely on all credit suppliers positive information which would increase credit approval by commercial Banks. Commercial Banks of Kenya were noted to have embraced the usage of CRB as indicated by 70% of the banks that they received clients? information from both Trans Union Africa and Metropol, 20% from Trans Union Africa, and 10% from Metropol. The study concluded that Commercial Banks have embraced and utilised credit information sharing which has an impact in reducing non-performing loans and hence it is in line with the CBK for the launch of the concept of Credit Referencing. The study recommended that commercial banks should fully adopt and practice the concept of credit information sharing at every stage of credit appraisal so as to enable them weed out potential loan defaulters. Suggested further research was in the; analysis of CRB activities on credit accessibility from the customers? perspective; how the CRB has influenced the improvement of performing loans among the SACCOs; and Finding out the CRB effects on the performance of Deposit-Taking Microfinance (DTMs) in Kenya.

Download or read book Influence of Credit Risk Monitoring on Lending Performance of Commercial Banks in Nairobi County Kenya written by John Karanja and published by . This book was released on 2018 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The credit risk poses a significant exposure not only to the banks but also to the entire economy, which is evident in east Africa financial crises. This is because of the fact that the banking is a vital industry of any economy. There has been a dramatic loss in the banking industry and suddenly announced large losses due to credit exposures that turned sour. This emphasizes the importance of managing the credit risk within the banking sector. Lending is a very profitable activity of the bank since customer pays interest on the amount borrowed. But this profitable activity also has problems which arise as a result of delayance or default in loan repayments which can be so extended and interconnected. The general objective of this study was to evaluate the influence of credit risk monitoring on lending performance of commercial banks in Nairobi County, Kenya. This study used descriptive survey research design and the target population for this study was at two levels. The target population was employees of the 42 commercial banks in operation in Kenya as at 1st January, 2018. Primary data was collected using questionnaires that have both structured and unstructured questions. The researcher analyzed the data using descriptive statistics and logistic regression analysis (binary) was used. The results of the study revealed that the combined effect of credit risks monitoring activities influenced bank lending performance positively. The study concludes that credit risk monitoring activities significantly influence the lending performance of commercial banks and this has affected the performance of the entire sector. The study recommended that KBA and CBK should make it a requirement that borrowers should be submitting reports regularly to the bank on changes in the value of collateral which was used to acquire loan.

Download or read book Determinants of Effective Debt Collection in Commercial Banks in Kenya MBA Thesis a Ccompanied by a CD ROM written by and published by . This book was released on 2014 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial institutions have faced difficulties due to many reasons. The main cause of the serious banking problems is mainly attributed to credit default by borrowers. This is as a result of poor credit management, poor management of the loan portfolio or economic and other circumstances that can lead to deterioration in the quality of a bank?s loan book. Unstable economic times lead to higher default rate as borrowers are unable to repay their loan due to the shrinking purchasing power. The purpose of this study was to determine the determinants of effective debt collection practices in Kenyan commercial banks. The researcher was seeking to establish: i) To what extent does staff competency affect the effectiveness of debt collection in commercial banks? ii) What is the effect of resources on the effectiveness of debt collection in commercial banks? (iii) To what extent does information management affect effectiveness of debt collection in commercial banks? The total population of the study was 1118 credit managers/supervisors or branch managers of the 37 commercial banks. A sample size of 118 respondents was selected through random sampling technique, which represents a 10% of the population. The data was collected using a questionnaire. Secondary data on the level of Nonperforming loans/Gross loans was also collected. The data collected was analyzed using descriptive statistics such as frequencies and measures of central tendency such as mean. The data was analyzed using SPSS software (statistical package for social sciences). Tables and pie charts were used to present the findings. Results indicated that staff competence was highly emphasized in the banks. The results have shown that most respondents believe that new employees get good induction training, the induction training included training on task relating to the job and that on the job training was crucial for improving employee performance. Majority also believed that the training offered to them had widened their knowledge gap and had assisted them adjust to the work environment. It is also the belief of most of the respondents that the banks offered short term training which enhance staff competency and that the banks encouraged staff exchange programs as a means of training the staff. This implies that an increase in the effectiveness of staff competence influences the non-performing loans negatively. The study findings also indicated that the banks have set aside enough resources to facilitate and mobilize the employees working in the debt collection departments to carry out their duties effectively and efficiently. The study findings indicate that majority of the respondents agreed with the statements that the bank provides vehicles for staff mobilization while carrying out their duties, the bank provides airtime for staff in debt collection department for follow up calls, the bank has enough number of staff in the debt collection department, the employees of the bank are well remunerated to avoid corruption issues and the bank has invested heavily in technological resources to ensure smooth work flow of employees. Correlation results led to the conclusion that the relationship between financial resources and non-performing loans is negative and significant. Results also revealed that the banks had invested in management information systems which were easy to use and compatible with other bank systems in place. Based on the results we note that a large portion on the respondents believed that the bank had invested in a management information system that is user friendly, the information system that the bank had invested in has helped minimize administrative costs, that the core banking system was compatible with the other information systems in the bank and that the banks? core information system could accommodate the banks growth, and that the information system being used by the bank had helped to enhance employee performance and productivity. The respondents also believed that employees had time and freedom to chat freely with their colleagues. Correlation results show that the relationship between management information system and nonperforming loans was significantly negative. Based on the results from the study, the researcher?s recommendation is that the banks need to enhance staff competence through proper induction at the point of recruitment as well as continuous training for the existing employees. This will have an impact on the effectiveness of debt collection processes within the bank. The management should also create a platform where information on the general performance of the bank can be shared with other employees. The banks also need to allocate ample resources to be used for debt collection. The study also recommends that banks should invest more in Information technology which will positively enhance debt collection processes within the banks and as a result lower the ratio of Non-performing loans. The management information systems that the banks adopt should be easy to use, cost efficient in terms of operation and administration, compatible with other systems in use within the bank and flexible enough to accommodate growth of the bank when it occurs.

Download or read book Determinants of Commercial Bank Interest Margins and Profitability written by Asl? Demirgüç-Kunt and published by World Bank Publications. This book was released on 1998 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: March 1998 Differences in interest margins reflect differences in bank characteristics, macroeconomic conditions, existing financial structure and taxation, regulation, and other institutional factors. Using bank data for 80 countries for 1988-95, Demirgüç-Kunt and Huizinga show that differences in interest margins and bank profitability reflect various determinants: * Bank characteristics. * Macroeconomic conditions. * Explicit and implicit bank taxes. * Regulation of deposit insurance. * General financial structure. * Several underlying legal and institutional indicators. Controlling for differences in bank activity, leverage, and the macroeconomic environment, they find (among other things) that: * Banks in countries with a more competitive banking sector-where banking assets constitute a larger share of GDP-have smaller margins and are less profitable. The bank concentration ratio also affects bank profitability; larger banks tend to have higher margins. * Well-capitalized banks have higher net interest margins and are more profitable. This is consistent with the fact that banks with higher capital ratios have a lower cost of funding because of lower prospective bankruptcy costs. * Differences in a bank's activity mix affect spread and profitability. Banks with relatively high noninterest-earning assets are less profitable. Also, banks that rely largely on deposits for their funding are less profitable, as deposits require more branching and other expenses. Similarly, variations in overhead and other operating costs are reflected in variations in bank interest margins, as banks pass their operating costs (including the corporate tax burden) on to their depositors and lenders. * In developing countries foreign banks have greater margins and profits than domestic banks. In industrial countries, the opposite is true. * Macroeconomic factors also explain variation in interest margins. Inflation is associated with higher realized interest margins and greater profitability. Inflation brings higher costs-more transactions and generally more extensive branch networks-and also more income from bank float. Bank income increases more with inflation than bank costs do. * There is evidence that the corporate tax burden is fully passed on to bank customers in poor and rich countries alike. * Legal and institutional differences matter. Indicators of better contract enforcement, efficiency in the legal system, and lack of corruption are associated with lower realized interest margins and lower profitability. This paper-a product of the Development Research Group-is part of a larger effort in the group to study bank efficiency.

Download or read book Sectoral Risk and Return Implications on Commercial Banks Credit Expansion in Kenya written by Ferdinand Othieno and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper examines the effect of sectoral risk on bank returns that accrue from the extension of credit to the different sectors of the economy in Kenya. Based on Dynamic Panel Data regressions of quarterly sectoral data spanning from 2011Q1 to 2015Q4 the paper reports three key findings: (1) There is no strong evidence of risk-based pricing since the risk-return relationship although positive, it is statistically insignificant. (2) There is no evidence of a U-shaped or non-linear relationship between risk and return regardless of the measure of risk, (3) Sectoral credit expansion is significantly impacted by returns and risk. Whereas the pricing effect is not as sensitive to the risk profile of the respective sectors, credit availed to the sectors is highly risk sensitive regardless of the measure of risk; effectively higher risk ratings seem to drive credit availability as opposed to pricing of the extended loans. The results question the risk-pricing nexus in the Kenyan market, if the risk is at least measured at the sectoral level.

Download or read book Effect of Monetary Policy on Performance of Commercial Banks in Kenya written by Clifford Milimu and published by . This book was released on 2016-11-22 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Bancassurance on Financial Performance of Commercial Banks in Kenya written by Dorothy Wambui Muigai-Ngunu and published by . This book was released on 2019 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Credit Risk Management In and Out of the Financial Crisis written by Anthony Saunders and published by John Wiley & Sons. This book was released on 2010-04-16 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: A classic book on credit risk management is updated to reflect the current economic crisis Credit Risk Management In and Out of the Financial Crisis dissects the 2007-2008 credit crisis and provides solutions for professionals looking to better manage risk through modeling and new technology. This book is a complete update to Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, reflecting events stemming from the recent credit crisis. Authors Anthony Saunders and Linda Allen address everything from the implications of new regulations to how the new rules will change everyday activity in the finance industry. They also provide techniques for modeling-credit scoring, structural, and reduced form models-while offering sound advice for stress testing credit risk models and when to accept or reject loans. Breaks down the latest credit risk measurement and modeling techniques and simplifies many of the technical and analytical details surrounding them Concentrates on the underlying economics to objectively evaluate new models Includes new chapters on how to prevent another crisis from occurring Understanding credit risk measurement is now more important than ever. Credit Risk Management In and Out of the Financial Crisis will solidify your knowledge of this dynamic discipline.

Download or read book The Effect of Real Estate Finance on the Financial Performance of Listed Commercial Banks in Kenya written by Fredrick Onyango Odhiambo and published by . This book was released on 2015 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the years, real estate financing has been a preserve for mortgage financing companies. With time, commercial banks have started engaging in mortgage financing. With the rising non-performing loans among Kenyan banks, mortgages have seen as a safer bet to improve the loan portfolio performance. The study sought to investigate the effect of real estate finance on the financial performance of listed commercial banks in Kenya. Data for nine listed commercial banks was collected for the period 2009-2013 from the annual reports of the respective banks. Panel regression analysis was employed on the collected data. The results showed that real estate finance did not have a significant effect on the financial performance of listed commercial banks. Foreign ownership, market structure, cost of bank operations, and the size of the bank significantly influenced bank performance. The study concludes that real estate finance does not influence the financial performance of listed commercial banks. It is recommended that the Central Bank of Kenya (CBK) and stakeholders in the housing sector strategize to improve uptake of affordable mortgage loans in order to improve the overall performance of banks. This study contributes to literature by providing the link between real estate financing and the financial performance of banks from a developing country's perspective in Sub-Saharan Africa where housing demand is on the rise and therefore offers enormous opportunity for rapid growth for banks. Further areas for research are recommended.

Download or read book How Foreign Participation and Market Concentration Impact Bank Spreads written by Ashoka Mody and published by World Bank Publications. This book was released on 2004 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors' market structures in developing countries. Martinez Peria and Mody analyze the impact of these factors on Latin American bank spreads during the late 1990s. Their results suggest that foreign banks were able to charge lower spreads relative to domestic banks. This was more so for de novo foreign banks than for those that entered through acquisitions. The overall level of foreign bank participation seemed to influence spreads indirectly, primarily through its effect on administrative costs. Bank concentration was positively and directly related to both higher spreads and costs. This paper--a product of Finance, Development Research Group--is part of a larger effort in the group to understand banking sector market structure changes in developing countries.

Download or read book Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya MBA Thesis Accompanied by a CD ROM written by and published by . This book was released on 2014 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of the study was to assess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement? A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank?s head offices and picked up later when the respondents had filled the questionnaires.Descriptive analysis was used to analyze quantitative data while content analysis was used to analyse qualitative data. The findings show that capital adequacy requirement is important in commercial banks because it leads financial stability in the Kenyan economy, improves credit risk management techniques as poor credit risk management requires more capital and leads to reduced vulnerability to liquidity shocks due to the sound capitalisation policies being implemented under the Basel III framework. Findings also revealed that capital adequacy affected the balance sheet structure of the commercial banks in Kenya. Smaller banks without the minimum capital requirements in their balance sheet would be required to merge with other smaller banks or seek additional capital injection from investors. Middle tier banks have gone to the stock markets to seek additional capital through rights and bond issue. Large multinational banks have sought capital injections from their parent company. Hence capital adequacy have has significantly changed the balance sheet structure of commercial banks in Kenya. The commercial banks in Kenya have deployed various strategies to comply with the looming capital adequacy requirements. These strategies include cutting back on lending, withholding dividend payments, aggressively increasing their interest income and other revenues through various promotions, offers and products in the lending market. This has been combined with cost cutting measures so as to increase net profits hence improving the capital base through retained earnings. Some commercial banks listed in the Nairobi Securities Exchange have issued additional shares through rights issues in order to ensure compliance with the capital adequacy requirement. The study recommends that banks should continue the pursuit of various strategies to ensure that they are in compliance with Basel III requirements and the Central Bank of Kenya?s Prudential Guidelines. This will be achieved through the expertise and involvement of the Asset and Liability Management Committee. The staff of this committee should be drawn from mainly the finance, legal, compliance and treasury departments. Compliance with the capital requirements will lead to a safety net for all commercial banks as the additional capital will act as a cushion that absorbs losses in case of distress in the commercial banking sector.

Download or read book Credit Scoring and Its Applications Second Edition written by Lyn Thomas and published by SIAM. This book was released on 2017-08-16 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit Scoring and Its Applications?is recognized as the bible of credit scoring. It contains a comprehensive review of the objectives, methods, and practical implementation of credit and behavioral scoring. The authors review principles of the statistical and operations research methods used in building scorecards, as well as the advantages and disadvantages of each approach. The book contains a description of practical problems encountered in building, using, and monitoring scorecards and examines some of the country-specific issues in bankruptcy, equal opportunities, and privacy legislation. It contains a discussion of economic theories of consumers' use of credit, and readers will gain an understanding of what lending institutions seek to achieve by using credit scoring and the changes in their objectives.? New to the second edition are lessons that can be learned for operations research model building from the global financial crisis, current applications of scoring, discussions on the Basel Accords and their requirements for scoring, new methods for scorecard building and new expanded sections on ways of measuring scorecard performance. And survival analysis for credit scoring. Other unique features include methods of monitoring scorecards and deciding when to update them, as well as different applications of scoring, including direct marketing, profit scoring, tax inspection, prisoner release, and payment of fines.?

Download or read book The Impact of Credit Information Sharing on Bank Asset Quality written by and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Income Stream Diversification and Financial Performance of Commercial Banks in Kenya written by Stephen Githaiga Ngware and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks have resulted in strengthening their portfolio mix by diversifying their portfolios in order to eliminate risks, increase their revenue sources, remain profitable and survive the competitive environment. Diversification being the main challenge encountered by banks aims at minimizing the variability of operations by banks by reducing the concentration of deposits, loans and revenue that is generated from these activities. Income diversification aims at increasing the sources of interest as well as non- interest income, reduce interest rate risk and total unsystematic risk. Capping of rates of interest has been judged to be a threat to performance of the banking institutions in Kenya and thus a need for commercial banking institutions to strengthen by diversification their streams of income. The 43 commercial banking institutions having official license from CBK by December 2017 were the target population of this study. The study analyzed Time Series Cross Sectional unbalanced secondary panel data obtained from KNBS, World Bank website, CBK, published financial accounts statements of all the 43 commercial banking institutions in Kenya, and the Banking survey publications for fifteen years ranging from 2002 to 2017. Four hypotheses were estimated using techniques of Panel data by adoption of fixed effects and random effects. Generalized Method of Moments (GMM) was used to estimate short run model. Income streams diversification had an association that was significantly positive on financial performance of commercial banking institutions in Kenya.

Download or read book DETERMINANTS OF FINANCIAL PERFORMANCE OF COMMERCIAL BANKS OF KENYA written by NAMUGERWA FALIDAH. and published by . This book was released on 2015 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: