Influence of interest rates determinants on the quality of credit portfolio offered by commercial banks in Kenya

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dc.contributor.authorOmbito, Brian Chitala
dc.date.accessioned2021-06-28T12:48:03Z
dc.date.available2021-06-28T12:48:03Z
dc.date.issued2020
dc.descriptionA Dissertation submitted in partial fulfillment of the requirement for Degree of Master of Science in Development Finance at Strathmore Business Schoolen_US
dc.description.abstractThe quality of credit portfolio influences the ability of commercial banks to lend to its customers in a sustainable manner. While managing the quality of credit portfolio for commercial banks remains a challenge, the issuing of loans and advances is critical to most commercial banks’ performance around the globe. Interest rates determinants affect the quality of credit portfolio offered by commercial banks. The main objective of this study is to analyse the influence of interest rates determinants on the quality of credit portfolio offered by commercial banks in Kenya. The study sought to answer the questions on whether interest rates determinants of total savings, cost of savings, operational costs and capital adequacy influence the quality of credit portfolio offered by commercial banks in Kenya. The study was guided by the Loanable fund’s theory, Keynes liquidity theory and Classical theory of interest. The positivist research philosophy was used for this study and a causal research design is adopted. Quantitative data was extracted from the financial statements of commercial banks for the period ranging from 2009 to 2018 with the population covering 40 commercial banks. The data was analysed using descriptive and inferential statistics which included mean, standard deviation, regression analysis. The findings of the study indicate that interest rates determinants of total of savings, cost of savings, capital adequacy and operational costs have a significant influence on quality of credit portfolio offered by commercial banks in Kenya. The study found out that among the interest rates determinants, capital adequacy had the greatest effect on the quality of credit portfolio offered by commercial banks in Kenya, followed by total savings then operational costs while cost of savings had the least effect to the quality of credit portfolio offered by commercial banks in Kenya. The study recommends that the government, through the Central Bank of Kenya should be instrumental in developing policies and regulations to guide commercial banks in setting up of optimal interest rate spreads in order to promote loan uptake as well as improve performance of these commercial banks. Increased loan uptake will lead to growth in the economy of the country. The study recommended banks should increase the amount of core capital since measure of capital adequacy showed that banks with high capital adequacy ratios perform better financially.en_US
dc.identifier.urihttp://hdl.handle.net/11071/12039
dc.language.isoenen_US
dc.publisherStrathmore Universityen_US
dc.subjectCredit portfolioen_US
dc.subjectInterest ratesen_US
dc.subjectTotal of savingsen_US
dc.subjectCost of savingsen_US
dc.subjectCapital adequacyen_US
dc.subjectOperational costsen_US
dc.subjectCommercial banks_Kenyaen_US
dc.titleInfluence of interest rates determinants on the quality of credit portfolio offered by commercial banks in Kenyaen_US
dc.typeThesisen_US
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MDF Theses and Dissertations (2020)