Stakeholder Perception of Credit Reference Service in the Kenya Credit Market
Abstract
The Kenya credit market is characterized by high level of default tendencies resulting to huge
non-performing loans. High figures have continuously been posted for write-off despite efforts
by organizations to review and refine their lending rules. Banks, utility companies,
microfinance institutions, hire purchase firms, credit card firms, higher education loans board
and saccos have all fallen prey to defaulters. Defaulters have managed to move from one
lender to another leaving a trail of unpaid debt obligations due to the fact that a mechanism for
default information sharing has been lacking. The risk-borrowers have taken advantage of this
gap (information asymmetry) to create multiple bad debts in the credit market.In 2007 The
Banking (Credit Reference Bureaus) Act was enacted to compel the banks to share default
information through licensed Credit Reference Bureaus. Whereas the Banking sector is leaping
massively from the service, other players in the credit market have not benefited much because
they have not fully embraced the service. This study aims to find out the perception of all
stakeholders in the credit market towards Credit Reference Bureau services and the extent to
which they embrace the service. Stratified disproportionate random sampling was carried out
from 5 strata and a sample size of 70 samples drawn and data collected in the Nairobi region.
The findings of the study indicated that there is appositive relationship between perception and
the degree of embracing the credit reference services by the stakeholders. This study will be
helpful to all players in the credit market in formulating policies that will help in establishing
an all inclusive compliance to default information sharing by all credit grantors. When all the
players are compelled to share the default information, the perception and degree of embracing
the service will be high and the end benefit is that default tendencies will be reduced, the
amount of bad debts will be reduced and the credit market will record quality and healthy
lending devoid of non-performing loans and bad debts thereby stabilizing the credit market
Citation
Ng'ang'a, 2012Sponsorhip
University of NairobiPublisher
School of Business
Description
MBA- Thesis