Credit Risk Management and Profitability of Commercial Banks in Kenya

CREDIT RISK MANAGEMENT AND PROFITABILITY OF COMMERCIAL BANKS IN KENYA

BY

ANGELA M. KITHINJI

SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI, NAIROBI – KENYA. [e-mail] or [e-mail]

OCTOBER, 2010

TABLE OF CONTENTS
1.0 INTRODUCTION....................................................................................................................1 1.1 Background ................................................................................................................................1 1.2 Statement of the Problem .........................................................................................................11 1.3 Objectives of the Study ............................................................................................................12 2.0 DATA ANALYS IS AND APPROACH................................................................................12 3.0 FINDINGS AND DISCUSS ION OF THE RES ULTS ........................................................12 3.1 Credit Risk Policies Adopted by Commercial Banks in Kenya..............Error! Bookmark not defined. 3.2 Amount of Credit and Level of Non-Performing Loans ..........................................................19 3.3 Profitability of the Banks .........................................................................................................21 3.4 Profitability, Level of Cedit and Non Performing Loans........ Error! Bookmark not defined. 3.5 Relationship Between Profits, Amount of Credit and Nonperforming Loans ................2Error! Bookmark not defined. 3.6 The Regression M odel .......................................................... 2Error! Bookmark not defined. 4.0 S UMMARY OF FINDINGS AND CONCLUS IONS ............ Error! Bookmark not defined. REFERENCES .............................................................................................................................27

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1.0 INTRODUCTION
1.1 Background The risk focused examination process

References: 27 Basle Committee on Banking Supervision (2001a), “The New Basel Accord”, The Basle Committee, January Basle Committee on Banking Supervision (2001b), “The Standard Approach to Credit Risk”, The Basle Committee, January