Factors affecting loan repayment among customers of commercial banks in Kenya: a case of barclays bank of Kenya, Nairobi county

Abstract

The purpose of this study was to investigate factors affecting loan repayment among customers of commercial Banks in Kenya with specific reference to Barclays Bank of Kenya Limited. The study achieved its purpose through three objectives namely to determine the effect of Lenders factors on loan repayment among customers of commercial Banks in Kenya, to find out the extent to which Borrowers factors affect loan repayment among customers of commercial Banks in Kenya and finally to establish the effect of loan factors on loan repayment among customers of commercial Banks in Kenya. The study included staff of Barclays Bank of Kenya which includes Credit Administrators and Relationship Managers within the Branches of Nairobi County. It also included both mass market customers and the relationship managed customers. The target population included 78 respondents. The research design used was descriptive statistics. The study reviewed relevant literature with the aim of establishing a gap which the research fulfilled. Methods of collecting data were questionnaires and interview schedules. This study concludes that there is a significant relationship between firm/group factors and the loan repayment among customers of commercial banks in Kenya. The study also concludes that there is a significant relationship between individual borrowers’ factors and the loan repayment among customers of commercial banks in Kenya. The study further concludes that there is a significant relationship between loan factors and the loan repayment among customers of commercial banks in Kenya. The study recommends that commercial banks need to have mandatory supervision borrowers on loan utilization and repayment. The study also recommends that banks should apply efficient and effective credit risk management that will ensure that loans are matched with ability to repay, no or minimal insider lending, loan defaults are projected accordingly and relevant measures taken to minimize the same. The study further recommends that commercial banks should pool together and establish a credit information bureau to which reference can be made before a loan is disbursement. The study recommends that commercial banks should also apply rigorous policies on loan advances so as loans are awarded to those with ability to repay and mitigate moral hazards such as insider lending and information asymmetry.