International Journal of Science and Research (IJSR)

International Journal of Science and Research (IJSR)
www.ijsr.net | Most Trusted Research Journal Since Year 2012

ISSN: 2319-7064



Research Paper | Financial Engineering | Kenya | Volume 3 Issue 4, April 2014

Effect of Risk Factors on Disparities in Interest Rates? Spread for Unsecured Loans among Commercial Banks in Kenya: A Case of Banks in Nakuru Town

Njenga M. Kamau, Wanyoike M. Daniel

Interest rate spreads (IRS) are a common measure of financial market. It is worth noting that there is a conspicuous disparity in IRS amongst the various commercial banks in Kenya and specifically on unsecured loans. Though there have been extensive research studies on IRS, the effect of risk factors on disparities in IRS, nevertheless, has not sufficiently been researched. The objective of the study was to establish the effect of risk factors on IRS disparity for unsecured loans. The population of the study comprised of the 46 commercial banks in Kenya. The target population constituted accounting, credit and management staff of commercial banks within Nakuru town. The study adopted descriptive research design. Structured questionnaires were used to collect primary data while the secondary data was collected through the analysis of the Central Bank of Kenyas Reports and targeted commercial banks published financial statements. The SPSS was used to process and analyze the data collected. The data was analyzed quantitatively with a view of obtaining both descriptive and inferential statistical results. The findings were presented in form of frequency distribution tables, and descriptive and inferential statistics tables. According to the findings it was found that risk factors affect disparities in IRS. Risk factors were concluded to occasion a very significant effect on the spread. It was specifically inferred that there exist conspicuous disparities in interest rate spread across commercial banks; and that most banks have defined their credit risk limit. It was recommended that commercial banks should adhere with all the set CBK regulations. It was also recommended that banks need to devise other strategies that can enhance their profitability besides altering the spread, and banks ought to formulate strategies for minimizing the various types of risks that impact on interest rate spread. It was suggested that it would be important for scholars to embark on studies touching on the strategies that commercial banks can employ to minimize interest rate spread without negatively compromising their profitability.

Keywords: Interest Rate Spread, Unsecured Loans, Liquidity, Risk Factors, CBK

Edition: Volume 3 Issue 4, April 2014

Pages: 643 - 647


How to Cite this Article?

Njenga M. Kamau, Wanyoike M. Daniel, "Effect of Risk Factors on Disparities in Interest Rates? Spread for Unsecured Loans among Commercial Banks in Kenya: A Case of Banks in Nakuru Town", International Journal of Science and Research (IJSR), https://www.ijsr.net/search_index_results_paperid.php?id=20131531, Volume 3 Issue 4, April 2014, 643 - 647

27 PDF Views | 27 PDF Downloads

Download Article PDF



Similar Articles with Keyword 'Interest Rate Spread'

Research Paper, Financial Engineering, Kenya, Volume 3 Issue 4, April 2014

Pages: 643 - 647

Effect of Risk Factors on Disparities in Interest Rates? Spread for Unsecured Loans among Commercial Banks in Kenya: A Case of Banks in Nakuru Town

Njenga M. Kamau, Wanyoike M. Daniel

Share this article

Research Paper, Financial Engineering, Kenya, Volume 4 Issue 11, November 2015

Pages: 617 - 620

Determinants of Interest Rate Spread of Commercial Banks in Kenya

Boniface Kimondo Njeri, Dr. Kepha Ombui, Dr. Assumptah W Kagiri

Share this article



Similar Articles with Keyword 'Liquidity'

Case Studies, Financial Engineering, Kenya, Volume 4 Issue 4, April 2015

Pages: 1124 - 1136

Effects of Working Capital Management on the Performance of Firms in Kenya: A Case Study of Kenya Ports Authority

Mwanahamisi Ali Wembe

Share this article

Research Paper, Financial Engineering, Kenya, Volume 3 Issue 4, April 2014

Pages: 643 - 647

Effect of Risk Factors on Disparities in Interest Rates? Spread for Unsecured Loans among Commercial Banks in Kenya: A Case of Banks in Nakuru Town

Njenga M. Kamau, Wanyoike M. Daniel

Share this article

Research Paper, Financial Engineering, Kenya, Volume 3 Issue 4, April 2014

Pages: 444 - 448

Effect of Aggressive Financing Policy on Profitability of Listed Companies at the Nairobi Securities Exchange, Kenya

Magadi S. Oloo, Muturi W. Mwangi

Share this article

Research Paper, Financial Engineering, Ethiopia, Volume 5 Issue 6, June 2016

Pages: 1347 - 1350

Evaluating the Financial Performance of Ethiopian Banks Using Financial Ratios-A Case Study of Dashen Bank

Evaluating the Financial Performance of Ethiopian Banks Using Financial Ratios-A Case Study of Dashen Bank

Share this article

Research Paper, Financial Engineering, Kenya, Volume 3 Issue 5, May 2014

Pages: 1397 - 1401

Impact of Conservative Financing Policy on Profitability of Listed Companies at the Nairobi Securities Exchange; Kenya

Magadi S. Oloo, Junge H. Bwire, Nyangau B. Onguso

Share this article



Similar Articles with Keyword 'CBK'

Research Paper, Financial Engineering, Kenya, Volume 3 Issue 4, April 2014

Pages: 643 - 647

Effect of Risk Factors on Disparities in Interest Rates? Spread for Unsecured Loans among Commercial Banks in Kenya: A Case of Banks in Nakuru Town

Njenga M. Kamau, Wanyoike M. Daniel

Share this article

Research Paper, Financial Engineering, Kenya, Volume 4 Issue 11, November 2015

Pages: 617 - 620

Determinants of Interest Rate Spread of Commercial Banks in Kenya

Boniface Kimondo Njeri, Dr. Kepha Ombui, Dr. Assumptah W Kagiri

Share this article
Top