The Relationship Between Credit Information Sharing and Non-performing Loan Among Microfinance Institutions in Kenya

Abstract

The purpose of the research was to realize the link between credit information sharing and Nonperforming Loans of Micro Finance Institutions in Kenya. The research adopted a descriptive research study. The research population comprised all 13MFI's registered by the CBK. The period of study ranged from the year 2014 to 2018. Secondary data was put to use for this study. Information gathered was analyzed via inferential statistics and descriptive statistics. Descriptive statistics such as standard deviation and mean kurtosis, and skewness were utilized to present analyzed data. The multiple regression was introduced as per the analytical model. The results indicated that the model fit with credit reports pulled, inflation rate, and interest rates were statistically significant in predicting non-performing loans. The coefficient table revealed that an increase for credit cards pulled resulted in It was also established that an increase in inflation rate and interest rate led to an improvement in the number of non-working loans. The study determined that credit report pulling had a positive impact on the reduction of non-working loans. Thus, the study recommends that all microfinance organizations implement the use of CRB reports. This will aid in the identification of frequent defaulters and guide the microfinance institutions in their lending. Findings from the study also displayed that the inflation rate harmed the reduction of nonperforming loans. Thus, the research recommends that the Central Bank of Kenya set up policies that will help cushion the economy from high inflation rates. Results of the study also established that interest rates harmed the reduction of nonperforming loans. The study thus recommends that the Central Bank of Kenya offer lower interest margins to loans advanced to the microfinance institutions. This would, in turn, lead to the microfinance institutions lowering their interest rates to their customers, thus reducing the number of nonperforming loans.