Vol 7 Issue 4 October 2020-December 2020
Stephen, Murey ,Yego, Dr.Joseph ,Gichure.
Abstract: Performance of commercial banks is essential in a dynamic and competitive world and therefore annual regular checking is needed. Most of the financial institutions utilize debt in different ways to influence the investment made in their assets which influences the return on equity. According to CBK annual reports released shocking evidence that non-performing loans for 2016 to 2019 was constantly increasing. It is therefore crucial to analyse whether the credit risk indicators are affecting the financial performance of the banks in the study attempting to make a modest contribution to literature on credit risk. The general purpose of the study is to evaluate the effect of debt recovery policy on performance of commercial banks in Kitale. The study was guided by the following objectives to evaluate the effect of credit terms on debt recovery and Performance of Commercial Banks in Kenya, to determine effect of customer appraisal on debt recovery and Performance of Commercial Banks in Kitale, to examine the effect of debt collection procedure on debt recovery and performance of commercial banks in Kitale, Kenya and to establish the effect of internal control on debt recovery and performance of commercial banks in Kenya. The research study was guided by the following theories; Debt management theory, The Grameen Solidarity Group Theory, Debt-snowball Theory and Credit Market Theory.This study adopted a descriptive research design. The study targeted 123 respondents from 10 banks drawn from each tier in the three categories of banks. The study access population comprised 10 branch managers, 10 Operations Managers 20 supervisors and 83 staff working in selected Commercial Banks in Kitale. Research instruments of the study were Questionnaires. Data was analysed using descriptive statistics such as frequencies and percentages and the multiple regression analysis was used to analyse and summarize the data.Regression estimates was used to describe data and to explain the relationship between one dependent variable and one or more independent variables. The study found that credit terms has a positive and significant effect on the performance of commercial banks in Kitale Town, (β1= 0.539, p=0.001); customer appraisal has a positive and significant effect on the Performance of Commercial Banks in Kitale Town, (β2=0.277, p=0.002); debt collection procedure has a positive and significant effect on the performance of commercial banks in Kitale Town, (β3=0.320, p=0.000) and internal control system has a positive and significant effect on the performance of commercial banks in Kitale Town, (β3=0.390, p=0.000). This study concludes that commercial banks consider credit terms necessary for its financial success and thus debt collection policy is necessary. Commercial banks have engaged its customers in regular contacts to remind pending dues. Finally, credit officers monitor and controls internal funds to be allocated to customers. The study recommends to the bank managers to consider reviewing good credit terms when allocating loans to its customers. This is because credits might be unfair to larger potential population in the market.
Keywords: credit terms, customer vetting, collection procedure, financial performance and internal control.
Title: EFFECT OF DEBT RECOVERY POLICY ON PERFORMANCE OF COMMERCIAL BANKS IN KITALE TOWN, KENYA
Author: Stephen, Murey ,Yego, Dr.Joseph ,Gichure.
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications