| dc.description.abstract | The 43 licensed commercial banks, as governed by the Central Bank of Kenya, play a
key role in the Kenyan economy and as such, the factors affecting their main business of
lending are of great importance. The study sought to determine the effect of nonperforming
loans on the size of the loan portfolio within these banks by using a census
study with the population consisting of all the commercial banks in Kenya. Secondary
data was collected from the financial statements of these banks and multiple linear
regression analysis used to analyse the data. The study revealed that there is a negative
and insignificant correlation between non-performing loans and the size of the loan
portfolio. In addition, there is a positive and significant correlation between the volume
of deposits and size of the loan portfolio and a negative significant correlation between
the share capital investment and size of the loan portfolio as well as other earnings assets
and size of the loan portfolio. The statistically insignificant effect of the non-performing
loans on the size of the loan portfolio is expected to be due to the non-performing loans
being below the acceptable threshold level of the commercial banks. The study
recommends that commercial banks in Kenya maintain their non-performing loans at a
level below the acceptable threshold in order to limit the effect of these loans on the size
of the loan portfolio. | en_US |
