Factors influencing repayment of bank loans: a case of NIC bank limited, Nairobi Province Kenya
A financial institution assumes a risk whenever a credit facility has been extended to a borrower under a financial contract. The fear of losing funds due to loan default has led to increased attention to Credit risk management which has cushioned the lenders against expected loss. Central Bank of Kenya (CBK) as a regulator has come in strongly in monitoring bank's lending in an effort to reward borrowers who have a good loan repayment history and to curb loan default. The purpose of this study was to establish the factors that influence loan repayment at NIC Bank Ltd. The research was guided by four objectives namely to establish the extent to which demographic factors influenced loan repayment; to investigate the level at which the type of loan influenced repayment; to determine the relationship between duration of loan and loan repayment and lastly to explore strategies used to improve loan repayment. Both quantitative and qualitative approaches were used in the research study and descriptive statistics was employed to present the findings. The population of interest constituted thirteen loan officers at NIC Bank and ninety two NIC loan customers. Both Open and close ended Questionnaires were used to collect data from the loan officers while Interview guides were used on NIC loan officers. The findings and subsequent discussions were thereafter analysed by SPSS and presented in tables. The study found that demographic factors influenced loan repayment both positively and negatively. There was a higher' loan repayment success rate among high income earners, older borrowers in terms of age and female loanees. The type and duration of loan also positively influenced repayment with long term loans having recorded lower default rate as compared to short and medium term loans. However, the study showed that the level of education did not necessarily influence loan repayment. The study recommends that NIC Bank should conduct comprehensive credit risk appraisals to ascertain the credit history of the borrower. The bank should also continually advise borrowers on the appropriate loans for implementation of different projects to ensure that funds are fully utilized for the venture they were intended for and maximize on return on investments.