Competitive Advantage of the Use of Credit Reference Bureaus by Commercial Banks in Kenya
Credit Reference Bureau (CRB) refers to a firm that collects information on individuals and firm’s credit worthiness from various sources then provides this information to financial institutions for decision making. In the banking sector in Kenya, banks have adopted use of CRBs services to enhance their efficiency in loan performance and competitiveness. The sound use of CRBs can be applied in collaboration with banking concepts to improve the quality of loans, increase the accessibility of loans to the informal sector and lower the interest rate charged by commercial banks in Kenya. This study sought to determine the competitive advantage that banks stand to gain by the use of CRBs. To achieve this objective, data was collected using questionnaires. The data collected was both qualitative and quantitative. Quantitative data collected was analyzed, coded and entered into a computer for analysis. The qualitative data was condensed into prose. The study found that the use of full file reports enabled banks to diversify their range of products and offer longer term loans that target industries such as manufacturing and construction. The study also helped banks to identify and serve new markets such as the youth that have good credit histories and no collateral and extend loans to them. The study recommended that managers of banks put efforts to fully integrate CRBs in their banking operations and the government through central bank put up a system of control to monitor the systems of information sharing among the banks. The researcher further recommends that commercial banks and CRBs should work together to increase public awareness of CRBs and its role in the banking industry.
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