The Influences of Credit Risk Management on Financial Performance of Commercial Banks in Kenya

Abstract

Credit management stands out as a crucial exercise in businesses and cannot be ignored by any monetary venture occupied with credit regardless of its inclination of business. Sound credit management is an essential part of a budgetary foundation's soundness and continuing profitability.Commercial Banks are in the business of lending money. This is their main source of income. Credit management is therefore critical to them without which they would lose their principal too in addition to the lost income. In the recent past, we have seen banks collapse due to poor and weak credit management policies. For instance we have seen Chase Bank come into the lime light because of its inability to honour its obligations-this is all about liquidity emanating from poor management and weak credit management policies. Imperial bank was also in the headlines for such like reasons. Institutions therefore need to have proper credit risk management policies that are working. But does this always translate into good performance in terms of increased profitability? This study sought to discover the influences of credit risk management on money related execution of recorded business banks in Kenya. It utilized a descriptive research design. The population of study consisted of 43 commercial banks in Kenya. A census study was used to carry out the research. Secondary data from financial statements of commercial banks in Kenya was collected. The study collected secondary data for the last five years starting year 2011 to 2015 from financial statements of the commercial banks. Descriptive statistics were used to analyze data.