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Commercial banks in Kenya as per the World Bank report recorded higher non-performance in loans than the standard globally in spite of Kenya having the most stable and developed banking system in East and Central Africa region. Commercial banks non-performing loans for five years from 2015 to 2018 averaged eleven percent which was higher than the recommended rate of one percent. In Kenya, commercial banks’ non-performing loans remain higher than the recommended rate which could be due to inadequate credit management practices. The study therefore aimed at examining the moderating role of the central bank regulations on the relationship between credit management practices and loan performance. The underpinning theory of the study was the credit risk theory. The study used explanatory research design and the research philosophy adopted was positivism. The target population was 44 commercial banks in Kenya and a census approach was used. Both primary and secondary data were used. Primary data was collected through structured questionnaires and related to credit management practices while secondary data was obtained from review of existing bank loan records in relation to loan amount advanced and non-performing loans for a period of four years from 2015-2018. Multiple regression analysis was used to test the study hypothesis. The study found out that Central Bank Regulations had no significant moderating effect on the relationship that exists between credit management practices and loan performance. Therefore, the study concluded that the moderating role of central bank regulations could not be confirmed. The study recommended that the central bank of Kenya to continuously assess and update credit management practices and the central bank regulations. The Government through regulating bodies should thus establish credit policies that regulate traditional and emerging credit practices among financial institutions.
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In-Text Citation: (Mburu et al., 2020)
To Cite this Article: Mburu, M. I., Mwangi, L. W., & Muathe, S. M. . (2020). Changing Landscape in Credit Management and Loan Performance: The Role of Central Bank Regulations in the Context of Commercial Banks in Kenya. International Journal of Academic Research in Business and Social Sciences, 10(12), 116–127.
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