Research Proposal on Factors affecting credit risk assessment in Kenya industrial estates limited
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Factors affecting credit risk assessment in Kenya industrial estates limited
Background and Literature
Kenya have experienced banking problems and (Kithinji and Waweru, 2007; Ngugi, 2001) developed countries including the USA are experiencing banking crisis. Research will investigate the factors affecting credit risk assessment in Kenya industrial estates limited. Thus, also investigate perceived level of success of initiatives. Central Bank of Kenya – CBK, (2003), there was 4.5 per cent decline in pre tax profit for the banking industry in the year 2002. Credit risks performance can be treated as undesirable outputs or costs to a loaning bank, which decrease the bank’s performance (Central Bank of Kenya, 2003). The risk of credit performing loan mainly arises as external economic environment becomes worse off such as economic depression respectively. Controlling non-performing loans is very important for both the performance of an individual bank (McNulty, Akhigbe, and Verbrugge, 2001) and the economy’s financial environment. Pazarbasioglu (1999) believes that the best warning signs of financial crises are proxies for the vulnerability of the banking and corporate sector. He showed that full-scale banking crises are associated more with external developments, and domestic variables are the main leading indicators of severe but contained banking distress. He adds that the most obvious indicators that can be used to predict banking crises are those that relate directly to the soundness of the banking system. Most of the larger local bank failures in Kenya, such as the Continental Bank, Trade Bank and Pan African Bank, involved extensive insider lending, often to politicians. The threat posed by insider lending to the soundness of the banks was exacerbated because many of the insider loans were invested in speculative projects such as real estate development, breached credit loan exposure limits, and were extended to projects which could not generate temporary returns, with the outcome that the maturities of the bank's assets and liabilities were imprudently mismatched and further observes that second major factor contributing to bank failure were the high interest rates charged to borrowers operating in high risk segments of the credit market.
The population has to comprise of Kenya industrial estates limited that have been in existence, licensed and registered under Banking Act and brought under statutory management of the Central Bank of Kenya. The respondents are to be selected middle level managers in Kenya industrial estates limited, comprised the credit manager, and 2 credit analysts of each bank and a total of 25 respondents. The respondents will be informed about intended study through email, researcher rely on referral from senior acquaintance in order to get to the relevant managers. Furthermore, primary data collected through questionnaires given out to the respondents. The data to provide answers to the research questions as to the factors affecting credit risk assessment in Kenya industrial estates limited, steps managers have taken as result of the effects of problem and how successful the steps have been. The questionnaire to develop from review of literature and design on basis of research questions with group of academicians and practitioners. Data to be analysed using SPSS software package. These include frequencies, total scores, means and percentages. Spreadsheets are to use to come up with appropriate charts and tables for data presentation, while total scores are to rank up responses.
Central Bank of Kenya, (2003), Inflation, Monthly Economic Review, Nairobi
KithinJi, A and Waweru. N.M. (2007) Merger Restructuring and Financial Performance of Commercial banks in Kenya. Economic, Management and Financial Markets Journal, 2 (4), 9-39
McNulty, J., Akhigbe, A. & Verbrugge, J. (2001). Small Bank Loan Quality in a Deregulated Environment: The Information Advantage Hypothesis. Journal of Economics and Business, 53, 325-39
Ngugi, R. An empirical analysis of interest rate spread in Kenya. AERC research paper 106, African Economic Research Consortium, Nairobi, 2001
Pazarbasioglu, C. (1999), Determinants and Leading Indicators of Banking Crises: Further Evidence