The Relationship Between the Level of Nonperforming Loans and the Financial Performance of Commercial Banks in Kenya
Abstract
This research project sought to establish the relationship between the non-performing
loans issued by commercial banks in Kenya and the financial performance of all
commercial banks in Kenya. Non- Performing loans (NPLs) are the portfolio loans issued
by banks but they are not paid up and not written off either. The population of the study
was all the 43 commercial in Kenya at the period of the study. The period of study was
2005 to 2011. The data used was secondary from financial statements of the commercial
banks for years of the study. Data was also obtained from Central Bank of Kenya.
The measure financial performance was ROA. The non performing loans were regressed
against the returns on the assets of the commercial banks to show the influence of the
former on the latter. In the early years of the study, the levels of nonperforming loans
were very high with the financial performance in terms of ROA being very low. With
time however, the levels of nonperforming loans significantly reduced with the
profitability levels increasing significantly. Banks should therefore put emphasis on
borrower analysis before issuing any loan.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
University of Nairobi, School of Business, University of Nairobi
Description
Master Thesis