| dc.description.abstract | Non-performing loans (NPLs) are tending towards a worrying level in Kenya, a
trend that could eventually cripple the financial sector in Kenya. As at January
2001, the level stood at 39% of the total loans in the Kenyan Commercial
Banks.
This study sets out to inquire into the factors that have been instrumental in the
creation of these non-performing loans and the extent to which each of these
factors has contributed to this trend.
The population of study was the commercial Banks in Kenya and specifically all
the Branches in Nairobi. A sample was drawn from this population - 35 banks
with no government shareholding and 20 banks in which the government has
shareholdings.
Questionnaires were distributed to the banks that had been sampled. The
response rate was 75% and 62.85% for the Banks with government
shareholding and those without government shareholding respectively.
The factors that were investigated were: interest rates, government influence,
exchange rate fluctuations, decline in economic growth, poor management of
businesses, culture, lack of a credit reference bureau, delays in approval,
under-financing of projects, misrepresentation of projects and lending that is
only based on security.
The respondents resoundingly indicated the decline in economic growth as the
most significant cause of NPLs in Kenya. This factor cuts across board for the
banks without government shareholding as well as those in which the
government has a shareholding.
Another interesting observation from the findings is that whereas government
influence has been seen as more influential within those banks that the
government has a shareholding, it has no doubt had a significant impact within
the banks that the government has no shareholding. This influence has been
demonstrated at the policy and political levels. The tourism industry is a case in
point.
The other factors were also' identified as significant, with varying degrees of
impact. | en |
