dc.description.abstract | Credit referencing entails collecting and collating credit financial data on borrowers including
individuals, businesses, companies, sole proprietors, companies and Government entities is the
function of credit reference bureau. Lenders in the world, particularly commercial banks, have
been citing the absence of a mechanism to know customers’ background as a major factor behind
the high lending charges they impose. One of the risks of making a bank loan or investing in a
debt security is credit risk, the risk of borrower default. In response to this potential problem,
new financial instruments called credit referencing has been developed in the past few years.
Thus the aim of the objective was to investigate the impact of credit referencing practices in
financial institutions in Kenya.
The research problem was best studied through the use of a descriptive survey. Primary data was
collected from the managers of the commercial banks since they were able to understand the
corporate governance issues concerning their institutions Questionnaire was administered to the
managers in all departments of the selected commercial banks. Data analysis used the Statistical
Package for Social Sciences (SPSS) software. With the help of (SPSS) the findings were
presented in form of frequency distribution tables, bar charts and pie charts. The findings
indicated that majority of the respondents agreed that inadequate information systems concerning
referencing affected market segmentation and credit referencing. According to the findings,
majority indicated that their banks reviewed their credit referencing policy half yearly.
The study concluded that that there was inadequate information systems concerning referencing
affected market segmentation and credit referencing. On credit referencing process, it was
evident that banks reviewed their credit referencing policy half yearly. The study recommended
that recommends that financial firms should adopt adequate information sharing systems on
credit referencing. Information sharing is deemed to be crucial to improve credit market
performance. Secondly the credit department should ensure that credit referencing process is
reviewed periodically. This will ensure accuracy, efficiency and effectiveness of the rating
associated with lending facility. | en |