The Effect of Credit Information Sharing on Profitability of Commercial Banks in Kenya
The banking industry as a whole has faced challenges in attaining wide-ranging information on clients’ payment history for use during their credit assessment process. The aim of the information sharing is to provide information that is very accurate, latest updates and give instant information on borrowers who have potential. This ensures that it is cost efficient and easier to assess the risk and thus managing it, thus enabling reduction of the involvement of unprofitable business and instead result in improvement of client portfolio profitability of the company and also quality. The main objective of this study was to establish the effect of credit information sharing on profitability of commercial banks in Kenya. The study used a descriptive survey design in evaluating the impact of CIS on profitability of commercial banks in Kenya. All the 43 commercial banks licensed by the Central Bank formed the target population as at December 2015. The study used secondary data covering a period of 10 years from the year 2005 to 2014. To determine the relationship between the variables in the study, multiple regression analysis was used. Statistical Package for the Social Sciences (SPSS) was used to capture and analyze the data. The independent variables studied were four in number and explained 87.8% of the operating margin. This implies that these variables are very significant therefore need to be considered in any effort to boost profitability of Kenyan commercial banks. The recommendation from this study is that other institutions offering other forms of credit such as trade credit to share information with Credit Reference Bureaus to enrich the database and to give a complete overview of borrowing entities in the view of diminishing information asymmetry in the Kenyan credit market.
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