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Research Paper | Business and Finance | Kenya | Volume 12 Issue 7, July 2023
Influence of Predatory Lender Practices on Loan Performance: Evidence from Commercial Banks in Kenya
Majory Wangari [3] | David N. Kiragu [2]
Abstract: In Kenya, commercial banks contribute approximately 5% to Gross Domestic Product (GDP). Their role is pivotal to the progressive delivery of Kenya vision?s 2030 economic Pillar. These institutions provide the payment system in the economy and access to credit to all other sectors in the economy through loans to individuals, corporate and government (s). However, loan performance trends have caught the attention of the economists and industry players. In the last ten (10) years, loan performance has deepened by over 185 points in the last decade (2012-2022). Recent statistics indicate that the consolidated nonperforming loans stood at a whooping over Kes 0.5 Trillion by 2022. The objective this study was to examine the influence of lender practices on loan performance among commercial bank in Kenya. The study applied a positivism research philosophy and a descriptive research design. The sampling frame and unit of analysis was the 39 commercial banks in Kenya (CBK, 2022). The unit of response was 234 managers of these 39 commercial banks. A closed ended questionnaire was used to collect primary data for the stimulus variable and a secondary data collection sheet in the case of the response variable. In order to assess the internal consistency of the instrument, a pre- test was carried out using managers of three Micro Finance Banks in Nairobi, Kenya. Further, to enhance construct validity. Simple linear regression was used for inferential analysis after testing the data for Gaussian distribution, linearity and autocorrelation. The study found that 43.1% of the variations in loan performance could be explained by lender practices and that there is a statistically significance influence of lender practices on loan performance. The study recommended that commercial banks review should develop a profiling tool that identifies customers who have been on loan without a break, customer who might need financial counseling, analyze possibility of managing loan appetite for customer with questionable ability to repay, re-evaluate certain products associated with relatively higher default rates, review policy on recharging securities successively and allow potential borrowers to review loan all terms and conditions before loan award.
Keywords: Lender practices, predatory, loan performance
Edition: Volume 12 Issue 7, July 2023,
Pages: 1824 - 1829