Lending policies and their effects on performance of commercial banks in Kenya
Bank Lending policy in Lending institution's is a statement of its philosophy, standards, and guidelines that its employees must observe in granting or refusing a loan request. These policies determine which retail or corporate clients the commercial banks approved for loans and which will be avoided, and must be based on the bank lending laws and regulations. This study investigated lending policies and their effects on performance in commercial banks in Kenya and to identify lending policies of commercial banks in Kenya. The objective of the study was to establish how lending policies affect commercial banks’ performance in Kenya. For the purpose of this study the research used descriptive survey. This was crucial in determination of lending policies adopted by commercial banks and establishing their effects on bank performance. The population of interest of this study was forty six (46) commercial banks in Kenya. The study being a survey implied that data was collected from all the 46 commercial banks. The researcher used structured questionnaires as the main data collection instrument. The questionnaires had both open and close-ended questions. The close ended questions provided more structured responses that facilitated tangible recommendations. Descriptive statistics was used to summarize the data. Data was presented using Tables and other graphical presentations as appropriate for ease of understanding and analysis. From the findings, the study concludes that lending policies formulated by the commercial banks are customers friendly, focused on customer capability, prevailing market condition that suit the customer needs and enables their clients to feels comfortable when borrowing from the banks. The study concludes that bank lending policies have effects on bank performance through attracting and retaining customers increasing the bank customer base, increase shareholder’s value, create customer satisfaction, create competitive advantage, reduce loan loss defaults and increase bank profitability.