Linking Non-Performing Loans, Bank Specific and Macroeconomic Factors: The Case of Kenyan Commercial Banks



This book provides a detailed research based evidence of the existence of high levels of non-performing loans (NPLs) in commercial banks in Kenya. The purpose of writing this book was to investigate the link between NPLs and bank-specific and macroeconomic factors, and establish the extent to which these factors affect the occurrence of nonperforming loans in commercial banks in Kenya. The main goal of every banking institution is to operate profitably in order to maintain stability and sustainable growth. However, the existence of high levels of NPLs in the banking industry negatively affects the level of private investment, impair a bank’s ability to settle its liabilities when they fall due and constrain the scope of bank credit to borrowers. External and internal economic environments are viewed as critical drivers for nonperforming loans. A causal-compararive research design and panel data analysis methodology was employed. Overall, the study found evidence that bank specific factors contribute to NPLs performance at higher magnitude compared with macroeconomic factors. The study recommends that commercial banks portfolio management strategies focus more on the bank specific factors which the management has more control over and seek practical and achievable solutions to redress NPLs problems. This book is recommended for use by – commercial banks and other financial institutions managers, Government, Researchers, Credit Referencing Bureau (CRB), donors, borrowers, academicians, policy makers, consultants and others interested parties working to improve the financial system and grow banking industry operations.

Prof. Beatrice Warue is a PhD holder in Business Administration and Management (Banking & Finance), Master of Business Administration (MBA) (banking and finance option), Master in Banking and Finance with focus in Microfinance (MBF), Bachelors in Business Administration (BBA) and Diploma in Business Education. She is a teacher by profession and a trainer of trainers (TOT). Prof. Warue is a full time lecturer with Africa International University (AIU) and currently Dean School of Business & Economics of AIU. She has a long teaching and management experience. She is widely published in refereed Journals and written books (“Principles and Practices of Microfinance in Kenya”; “Guidelines on Doctoral Research and Supervision”; “A Kenyan Jua Kali Manual” for informal sector and “County Rural Universities: DAEA’s Case for rural universities in Kenya”). Further she is a registered member of Doctoral Association of Eastern Africa (DAEA) where she is instrumental in decision making of the association. She has participated broadly in curriculum development for universities and colleges.


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