Credit Monitoring and recovery strategies adopted by Commecial Banks in Kenya

Abstract

Credit facilities can involve several different forms of credit, ranging from revolving credit to a line of credit that is available for the company as a source of standby funding. There are several ways to structure a credit facility. The strategy can involve one loan, or include a series of loans, all associated with the same facility. All loans involved in the process may be short-term, meaning they are paid in full within one calendar year, or be structured for repayment over a longer period of time. This research sought to establish the credit monitoring and recovery strategies adopted by commercial banks in Kenya All the banks in Kenya formed the population for this study. The data was collected from these banks and quantitative analysis was done. The findings were presented in tables and figures. The findings indicated that all the banks monitor loans to ensure proper payment. This indicates that banks take keen interest of loan repayment to ensure that they undergo minimal losses. The study has established that the banks in Kenya do generate reports to monitor loans by their clients. The study has established that banks have various strategies of debt recovery. The strategies indicated by the study include securing their loans, adequate training of the relationship officers, informing their customers and visiting their customers to convince them to pay the loans. The study has given the following recommendations; the policy makers in the banking institutions should use credit score card as a tool of monitoring of loan and recovering of such loans. The credit score card is a number that is based on a statistical analysis of a borrower’s credit report, and is used to represent the creditworthiness of that person. The policy makers in the banking institutions should make good use of private collection agencies in which the creditor agency retains the final authority to resolve disputes, compromise debts, suspend or terminate collection action, and refer accounts to Credit Reference Bureaus in order to avoid long court cases. The policy makers in the banking institutions should build good customer relations to ensure that their customers do not change names and notify them in times of changing business names to avoid the rise of bad debts that lead to the loses made by the banking institutions as a result of high bad debts.