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Research Paper | Management | Kenya | Volume 5 Issue 3, March 2016

Factors Affecting Credit Extension to the Tourism Sector Investment Facilities in Kenya by the Commercial Banks

Norah Buyaki Ratemo | Dr. Gladys Rotich PHD | Wicliffe Anyango

Abstract: The hospitality industry is one of the major and significant sectors contributing immensely to the countrys Gross Domestic Product (GDP). Moreover, credit financing is one of the major factors influencing performance and time to break even in the small and medium hotel sector in major urban areas in Kenya. Small and medium hotels face poor performance, high bankruptcy rates and reduced growth potential due to their inability to attract credit financing from financial institutions. The main objective of the study was to establish the factors influencing credit financing to tourism investment facilities by financial institutions in Kenya. The specific objectives were to, establish the effect of collateral on credit financing to the tourism sector by Kenyan financial institutions, to determine the effect of loan pricing by financial institutions to the tourism sector to, determine the extent that risk profile of the hotel influences credit financing by financial institutions in Kenya, and, to examine the effect of performance of the business on credit financing by financial institutions to the tourism sector. The study applied a descriptive cross-sectional design. The study population was 43 commercial banks in Kenya but only 40 commercial banks were operational at the time of the study. The study was a census where three employees from each bank were the study respondents. Questionnaire was utilized as data collection instrument in the current study. The study results established that availability of collateral is a major factor that positively influences credit financing to small and medium hotels by commercial banks. Moreover, loan pricing and risk profile negatively affects access to credit by small and medium hotels from commercial banks. Study results also determined that performance of small and medium hotels is significant in determining credit financing to the sector by commercial banks

Keywords: Credit extension, credit financing, collateral, loan pricing, risk profile, financial performance

Edition: Volume 5 Issue 3, March 2016,

Pages: 1616 - 1621

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