| dc.description.abstract | This study sets out to determine to what extent do other factors other than interest rate
contribute to the problem of Non-performing Loans (NPLs) in commercial banks in
Kenya. Kenyan banks suffer from serious financial fragility manifested by high
proportions of Non-Performing Loans (NPLs). In this paper, the research considered
Standard Chartered Bank (K) Limited and segmentation of the branches were done into
two regions, Nairobi and upcountry branches. To rank the factors that cause loan default,
statistical measures such as the mean, mode and standard deviation were used.
Non-performing Loans (NPLs) in commercial banks were found to be caused by various
reasons other than the much-assumed factor of high interest rate such as: diversion of
funds, economical decline, loss of job, multiple banking, poor management, operation
and system errors, illness, disasters, politics, competition, lack of knowledge, death, take
over, treasury bill rate, conflict with the law, dissolution, base lending rate, bankruptcy,
breach of contract, KRA interference, poor monitoring and control slow and unmoving
stock. The findings show that the most predominant cause of loans default is the
diversion of funds followed by the poor state of the economy while the least are poor
monitoring and control and KRA interference.
This study recommends that the commercial banks need to take into consideration all the
factors that cause loan defaults and besides this, they should find out ways of protecting
themselves against such factors. They need to train all their staff on the basic principles of
credit and should take a bold step in implementing Know Your Customer (KYC) project.
Further research should be done in this area and should incorporate concrete solutions in
reducing the incidences of non-performing loans in the commercial banks books. An
inter-banks study should be carried out to determine which bank is prevalent to the
problem. This study may be carried out annually to determine whether the solutions
suggested are effective and if not so, what can be done to alleviate the problem | en |
