Influence of bank loan financing on project performance: a case of Kenya commercial bank financed youth groups’ projects in Imenti south District-Kenya

Abstract

The purpose of this study was to investigate the influence of KCB bank loan financing on project performance. A case of KCB bank financed youth groups’ projects in Imenti South District. The objectives of this study were to establish influence of KCB bank loan interest rates on the performance of Youth groups’ projects, establish how collateral requirements by KCB bank influence the availability of loans and hence the performance of youth groups’ projects, to establish how loan repayment influence the performance of youth groups’ projects and to assess the influence of financial management training by KCB bank on the performance of youth groups’ projects. This research was undertaken by use of descriptive method which was cross sectional because it was most suitable for the data type collected and analyzed. The questionnaires used were designed to incorporate both the closed ended and open ended questions; the closed ended questions had the alternatives from which the responded had a variety of answers to choose one from. The open ended questions allowed the respondent an opportunity to provide their own views on how they perceived bank loan financing on the success of youth groups’ projects and enterprises performance. The target population of the study comprised members of registered youth groups’ funded by KCB bank in Imenti South District and bank officials of KCB bank in Imenti south district, the staff and management team of Nkubu KCB bank branch serving the region of Imenti South District and the officials of the registered youth groups’ in Imenti south District. Quantitative and Qualitative methods were employed to analyze the data collected from various sources. This entailed the use of simple descriptive statistics, MS Excel and the Statistical Package for the Social Sciences in data analysis. the study established that high interest rates, coupled with lack of entrepreneurial skills were seen as the major factors that have a direct bearing with the loan repayment among youth groups’, youth group owned projects lacked the necessary collateral, and were confronted with a dilemma of obtaining bank finance, most of youth groups’ projects were very dissatisfied with loan repayment terms, financial management training promoted group investment culture and simplified the decision making process, including helping members implement their investment plans, enabled group leaders to manage project finances efficiently, prepare for taxes and possible audits, balance their books, predict profits and plan their future accordingly. The study concludes that high bank loan interest rates, lack necessary collateral and lack of flexible repayment terms had a negative impact on access to credit availability and thus adversely affected the performance of youth groups’ projects. The study also concludes the financial management training by KCB bank enhanced the performance of youth groups’ projects. The study recommends for revision of loan interest rates too in a view of accommodating all borrowers at different economic levels. Organization of financial training seminars and workshops for entrepreneurship skill acquisition and loan investment and servicing, formulation of repayment schedules those are flexible and highly adjusted to accommodate borrower’s cash flow pattern and need to reassess on collateral requirements to avoid locking out small borrowers.