The Effect of Credit Policy on Performance of Commercial Banks in Kenya: A Case Study of Barclays Bank, Garissa Branch
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Date
2012-05
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Publisher
Kampala International University, College of Economics and Management
Abstract
The research study was undertaken on the effect of credit policy on performance of
commercial banks. The main objectives of the study/Research was to establish the relationship between credit policy and performance in commercial banks and also to determine the various credit policy
variables that the bank can implement to manage its credit properly and worthiness of their customers used by Barclays bank, Garissa branch to examine the relationship between the
two variables. Credit is a set of policy actions designed to minimize costs associated with
credit while maximizing the benefit from it. The objective of this policy is to have optimal
investors in debtors. An optimal investment where there is trade-off between the benefit and
cost associated with it. In other words the optimal level of investment, both objectives of
profitability and liquidity are realized.
The techniques used in the collection of the data were questionnaire and face to face
interview. The data collected was coded, edited and tabulated with the help of tables and
percentage that were essential techniques in presenting and analyzing the data.
From the findings of the study it was noted that the credit initiation process has a significant
effect on the performance of the bank. This implies that if the credit initiation is effectively
carried out, the performance of the commercial banks would be enhanced. Also noted in the
findings are that the recovery rates of Barclays Bank is high. This has been attributed to the
credit evaluation procedures and close supervision of customers due to enough available
credit officers.
It was however recommended that it's important for a commercial banks to determine its
investment portfolio and know the risk implication of the portfolio. The bank should be
aware of all factors that have impact on their investment decision and try to control those that
are internal, that is within the bank. The bank should then be able to decide on its clients as
well as their management in order to get a well performing portfolio.
Also recommended was in the assessment of a client, the banks should look at all the
elements of the credit policy management and to ensure that they all were well done. This
may include proper customer's information, scrutinizing customer's performance,
regular visit, follow laid down rules, extending proper loans and ensure close supervision.
This will help improve performance of Barclays Bank.
Description
A Research Project Submitted to the School of Business and Management in Partial Fulfillment for the Award of a Bachelors Degree in Business Administration of Kampala International University Kampala-Uganda
Keywords
Credit Policy, Performance, Commercial Banks, Barclays Bank