The Influence of Credit Management on Loans Portfolio Performance of Commercial Banks in Kenya
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Abstract
Banking sector is a key source of funding for most businesses. Improved loans portfolio management leads to high performance of banking institutions. Commercial banks use various avenues to generate their income. Credit management is one of the sensitive areas of management of banking institutions which deals with credit. Credit management gives assurance that loan borrowers will pay back the money lend to them by commercial banks. It is a vital component of the banking practice management function. A banking institution with proper credit management policy will enable it to improve its efficiency. Thus, this study sought to ascertain influence of credit management on loans portifolio performance of commercial banks in Kenya. Descriptive research design was used and data was collected from eleven commercial banks headquarters in Nairobi. The study was based on census approach as it focused on all the eleven commercial banks listed on NSE, Kenya. For each commercial bank listed, 5 respondents were sought, thus providing 55 respondents. Study employed both secondary and primary data. Instruments used to collect data were questionnaires and Central Bank of Kenya finanial reports websites, journals of Kenya bankers association and commercial banks of kenya accounts published annually. Data was analyzed using applied descriptive statstics, correlations and regression by use of Statistical Package for Social Sciences(SPSS). The aggregate mean score of credit management and loans portifolio performance of commercial banks was 4.07, and a strong correlation of r= .623. The conclusion from the findings indicated that employing proper credit management has a significant and positive influence on loans portifolio performance of commercial banks. The study recommended that commercial banks adopt sound policies reviews, carry out proper client appraisals, exercise delinquency credit management, and have in place a well-functioning Credit Management department
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