DETERMINANTS OF EFFECTIVE DEBT COLLECTION IN COMMERCIAL BANKS IN KENYA

Abstract

Purpose: The purpose of this study was to determine the determinants of effective debt collection practices in Kenyan commercial banks.Methodology:The research was carried out through descriptive survey design. The total population of the study was 1118credit managers/supervisors or branch managersof the 37 commercial banks. A sample size of 118 respondents was selected through random sampling technique, which represents a 10% of the population. The study used both secondary and primary data specifically the study used a questionnaire as the preferred data collection tool. The questionnaire had close ended questions only. Secondary data on the level of Nonperforming loans/Gross loans was also collected. This study used the quantitative method of data analysis. Quantitative methods of data analysis included inferential and descriptive statistics. Descriptive statistics included frequencies and measures of tendency mainly mean. Inferential statistics include correlation and regression analysis. The tool for data analysis was Statistical Package for Social Sciences (SPSS) version 20 program. The results were presented using tables and pie charts to give a clear picture of the research findings.Results:Results indicated that staff competence was highly emphasized in the banks. Results also revealed that the banks had invested in management information systems which were easy to use and compatible with other bank systems in place. Correlation results led to conclusion that that the relationship between staff competency and non-performing loans is negative and significant. It was concluded that the bank also had invested heavily intechnological resources to ensure smooth work flow of employees. Correlation results led to the conclusion that the relationship between financial resources and non-performing loans is negative and significant. The study further concludes that that the relationship between information technology management and non-performing loans is negative and significant. The findings imply that information technology has significant negative effect on non-performing loans.Policy recommendation:The study also recommends that investment in Information technology be emphasized in the banks as it has an effect on the overall achievement of competitive advantage. Therefore the organization is urged to invest in management information systems which are easy to use and which facilitate minimization of administration and operational costs.