| dc.description.abstract | The banking industry in Kenya is now characterized by increasing competition and
innovation. This phenomenon has led to most banks adopting cutting edge technology
and creating more tailor made products in different sectors especially SME sector to
improve the quality of their loan portfolio. This paper tries to establish the
relationship between performance of credit facilities to SMEs and other sectors and
the performance of commercial banks in Kenya and to examine the credit policies of
commercial banks in Kenya. The study focuses on performance of commercial banks
in Kenya on lending to SMEs. The main value of this study is to establish the
relationship between performances of commercial banks vis a viz lending to SMEs
from a Kenyan perspective. Relevant recommendations aimed at enhancing the
banking sector based on the topic of the study are also made. The study is not only
useful to the policy makers and academicians, but also to entrepreneurs interested in
the banking sector. The study established the relationship between lending to SMEs
and performance of commercial banks in Kenya. Survey of existing literature on the
subject was done and interviews were held to 23 respondents to establish the
relationship between lending to SMEs and performance of commercial banks in
Kenya. Data from 23 respondents was collected using questionnaire developed.
Information obtained was analyzed. Correlation analysis was used to determine
relationships among variables. The research study found out that the highest PAR in
the consumer and Agriculture sector stood at 15% and the lowest at 0.0%. The
highest PAR in the Micro Enterprises sector is 9.10% and the lowest is at 2%. In the
SME sector the highest PAR is at 1.80% and lowest in the sector is at 0.0%. This
means that the higher the PAR the higher the amounts to provision for write offs and
this directly eats into the profits of commercial banks. The lower the PAR the better
for the commercial banks since the provisioning with be of lesser amounts meaning
grater performance in terms of profitability. Comparing the three sectors it is evident
that SME sector is performing well with very low percentages of PAR. Results of the
study reveal strong relationship between financial performance of commercial banks
in Kenya and lending to SME sector as compared to other sectors like consumer and
Agriculture and micro enterprises. This study had limitations. Some of the
respondents did not return the questionnaires even after follow ups were done. Thirty
questionnaires were issued but only twenty three were returned. There was difficulty
in accessing the respondents due to their busy schedules and getting information,
which they felt, was confidential. In addition to this the responses were based on the
judgment of the interviewees and this could be subjective. | en_US |
