The Relationship Between Judicial Efficiency And Credit Market Development Among Financial Institutions In Kenya

Abstract

Enforcement of agreement and contracts binding parties to their actions as far as lending is concern can have an impact on credit market performance since it affects the risk and cost of credit transactions which ultimately affects things like credit rationing. This notion is supported by empirical research into the relationship between judicial system efficiency and credit market development among financial institutions in Kenya. The quickness and ease of the legal process are indicators of its effectiveness. According to the regression results, indications of judicial efficiency were also statistically relevant in explaining the loan market, in addition to more conventional variables. Case clearance rate and credit market development indicators have an inverse relationship. A lower interest rate differential, even at a low significance level, indicates more established credit markets in years with better judicial enforcement. The arbitrary cut-off level of 0.05 does not, however, provide sufficient rationale for scientific results or economic or governmental actions.