Determinants Of Commercial Banks’ Lending Behavior In Kenya: Case Of State Owned Banks In Kenya
This study sought to examine the determinants of lending behavior by commercial banks in the Kenyan banking sector with a focus on lending behavior of state owned commercial banks in Kenya. It sought to put to test what determines the lending behavior of commercial banks. There are many factors that can determine the lending behavior of banks but this study focused on Capital adequacy, Asset Quality, Interest rates and Liquidity. These made up the independent variables of the study. Most research studies focused on private & listed banks in the Nairobi Securities Exchange and thus the study sought to address this knowledge gap by focusing on Kenyan state owned banks. The study adopted descriptive survey with the population targeted being the three state owned Kenyan banks. This research relied on secondary data which was collected from the website of the state owned banks. The study used both inferential and descriptive statistics in the analysis. The descriptive statistical tools are used to enable a researcher to illustrate the data and determine the degree of its usage. Regression analysis was the main analysis tool. Excel 2007 application, tabulations, percentages, means and other central tendencies were used to analyze data. Findings were summarized using tables for further analysis. The study established out that liquidity ratio and capital adequacy positively affected credit extension significantly whereas interest rate and asset quality inversely affected credit creation of the state owned commercial banks. The effect of loan pricing (denominated in interest rate) on lending behavior was found to be statistically significant whereas asset quality was found to be statistically insignificant.
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