Effect of credit reference bureaus on the profitability of commercial banks in Kenya

Abstract

The purpose of the study was to examine the effect of credit reference bureaus on profitability of commercial banks in Kenya. The stu dy adopted a causal comparative descriptive research design and used secondary data for analysis. The target population consisted of 44 commercial banks in Kenya. The stud y concludes that credit reference bureau services assist in reducing the incidence of non-performing loans and hence in improving the bank profitability. This is made poss ible through the reduction of transaction costs, enhanced information sharing, re duced loan loss and delinquency, and enhanced credit evaluation practices due to credit reference bureau services are used. The study recommends that banks should continue to util ize the credit reference bureau services as it enhances their profitability. The se rvice lowers the risks involved in identifying suitable clients that the bank can adva nce loans to. Further studies should incorporate measures of GDP as they greatly affect profitability and also determine client perception on CRB.