Commercial Banking Crises in Kenya: Causes and Remedies

Abstract

Many Financial institutions that collapsed in Kenya since 1986 failed due to non performing loans. This study investigated the causes of non performing loans, the actions that bank mangers have taken to mitigate that problem and the level of success of such actions. Using a sample of 30 managers selected from the ten largest banks the study found that national economic downturn was perceived as the most important external factor. Customer failure to disclose vital information during the loan application process was considered to be the main customer specific factor. The study further found that Lack of an aggressive debt collection policy was perceived as the main bank specific factor, contributing to the non performing debt problem in Kenya.

Keywords: Banks, Financial institutions, non performing loans, Kenya

JEL Classification: G21, G20, N27