Effect of credit information sharing on non-performing loans in commercial banks in Kenya

Abstract

Commercial banks in Kenya are faced with high rates of loan default which has continuously caused significant losses. The banking sector in Kenya is continually being hampered by the non-performing loans and the lack of adequate funds to cover for them. Commercial banks are faced with information asymmetry where different banks have varied credit history pertaining to their borrowers. This study made use secondary data collected from the various central bank of Kenya supervisory and annual reports for the period 2008 to 2015. Analysis was done using SPSS and applied a bi-variate regression analysis. Results obtained indicate that non-performing loans reduce with increase in the access and use of credit reports. These results reaffirm the propositions by various literatures that use of credit information sharing has a positive impact on reducing non-performing loans. This finding helps the central bank of Kenya through its supervisory arm to come up more strategies of increasing sharing of both positive and negative credit information across the players in the banking sector.