INFLU ENCE OF CREDIT REFERENCING LENDING DECISIONS CREDIT COM IN ON COMMERCIAL BANK S KENYA: MERCIAL BANKS IN MOMBASA A CASE STUDY OF COUNTY, KENYA

Abstract

The banking industry has in the past been faced with the challenges of obtaining comprehensive information on clients’ repayment history for use during the credit assessment process and eventual disbursement of loans. This has led to poor lending decisions as defaulters move from one bank to another to secure credit facilities. The general objective of this study was to assess the influence of credit reference bureaus on commercial banks credit lending decisions in Kenya. The specific objectives of the study were to examine how the following factors impacted credit lending decisions by commercial banks in Kenya: borrower credit reports, borrower future credit risk identification and borrower repayment ability. The study was supported by the following theories: credit rationing, modern portfolio, corporate risk management and agency theories. This research adopted a cross-sectional survey research design aimed at collecting large number of quantitative data at a point in time to address the formulated hypotheses. The target population was 41 commercial banks, which in total have 51 branches in Mombasa County in Kenya. Census procedure was used; hence, all banks in Mombasa County were included in the study. The study collected data from all the respondents in the rank of branch managers, credit managers, and mortgage managers from all commercial banks in Mombasa County in Kenya. Primary data was collected by use of structured questionnaires which was distributed through the drop and pick method. Data analysis was by descriptive statistics and inferential statistics using Statistical Package for Social Sciences (SPSS) version 24. The study analyzed data through means, medians and standard deviations as descriptive statistics while correlation, regression and ANOVA analysis were the inferential statistics used. The data was presented by the use of tables and figures for purpose of giving a pictorial view of the results. The study provided a clear-cut mechanism of lending decisions and efficiency to the business fraternity in Mombasa. The study revealed that credit referencing, Credit information sharing, Borrower credit reports and Borrower repayment ability had a statistically significant influence on commercial banks’ credit lending decisions in Kenya as their R2 and Anova were 63.6% and F = 39.249, p = 0.000 respectively. The study recommended that commercial banks in Kenya should continue working closely with credit referencing and improvise real time reports sharing mechanisms so as to boost commercial banks’ credit lending decisions in Kenya. The study was important since it is likely to lead to led to awareness in the commercial bank’s credit lending decisions. This study has a possibility of being used as a benchmark to borrowing and lending in future.