The Effect of Credit Policy on Performance of Commercial Banks in Kenya: A Case Study of Barclays Bank, Garissa Branch

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Kampala International University, College of Economics and Management
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.
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
Credit Policy, Performance, Commercial Banks, Barclays Bank