Downscaling of credit risk policies as a strategic choice to gaining competitive advantage for Nic bank ltd in the sme sector in Kenya

Abstract

A firm must have strategic intent on becoming a market leader through deliberate selection of good strategic choices (Pearce & Robinson, 2007). Organizations are increasingly challenged to make sound strategic choices if they expect to gain competitive advantage and return sustainable profits to satisfy the expectations of the shareholders. Cut throat competition coupled with the desire to post positive results has forced banks to begin to look at other sectors which have not been attractive and/or have risks. A good example of such sector is the small and media enterprises (SME) which the banks have avoided for a long time for fear of default. Emerging trends show that banks which embrace SMEs tend to return above average profits. Such banks have to downscale their credit risk policies to remain attractive to the SME sector. NIC Bank has been touted to be the leader in Asset Financing in the country as it controls 30% of the Asset Financing business in the country. It is for this reason that the study sought to investigate down scaling of credit risk policies as a strategic choice to gaining competitive advantage by NIC Bank in the SME sector. Results of the study show that it is important for NIC Bank to downscale credit risk policies. However, it is also imperative that the bank must keep up to speed with advertising to maintain brand loyalty as well as visibility. The study also concluded that NIC Bank should not compromise on the risks inherent in SME loans but pursue strategies such as partnerships to keep SME business in control so as to avoid default.