The relationship between loan portifolio management and performance of Kenya Commercial Bank in Kenya

Abstract

Loan portfolio management has openly shown a direct impact in the performance of most banking institutions. This is based on the fact that many financial institutions have collapsed in Kenya due to poor loan portifolio procedures and combinations that had adverse effects on their performance (Waweru & Kalani, 2009). The prime objective of this study was to establish the relationship between loan portfolio management and performance of Kenya Commercial Bank in Kenya which was an attempt to bridge this gap in this field. This research was an empirical one and conducted a census focusing on KCB Kenya Branches in order to establish the relationship between loan portifolio management and performance between January and June 2012 because of the great performance levels in KCB. This made it easier to get adequate and accurate information necessary for this research. The researcher collected quantitative data on business loans, Personal loans, over draft facilities, Micro Finance loans, Institutional loans, Mortgage loans and Salary advances from KCB Finance Division. The data analysis was done using SPSS whereby inferential statistics was applied whereby a multiple regression model was employed. A multiple linear regression model of performance versus loan portfolios’ was applied to examine the relationship between the variables. The model treated performance in KCB Kenya branches as the dependent variable while the independent variables will be the loan portfolios including business loans, Personal loans, Over draft facilities, Micro Finance loans, Institutional loans, Mortgage loans and Salary advances. The study revealed that performance of the Kenya Commercial Bank had positive association with business loans, over draft facilities, micro finance loans, institutional loans and mortgage loans. The study also revealed that the Performance of Kenya Commercial banks was found to have negative association with, personal loans and salary advances. The study recommends that there is need for commercial banks in Kenya to have policies to regulate salaries advance and personal loans due to negative effects on the performance of the banks there is need for commercial banks in Kenya to increase their lending of business, institutional, micro finance, over draft and mortgage loans as this was found to positively influence the performance of Kenya Commercial Bank in Kenya.