Munich Personal RePEc Archive

Role of Credit Reference Bureau On Financial Intermediation: Evidence from The Commercial Banks in Kenya

Mungiria, James and Ondabu, Ibrahim (2019): Role of Credit Reference Bureau On Financial Intermediation: Evidence from The Commercial Banks in Kenya. Forthcoming in:

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Abstract

This study discusses the role of the Credit Reference Bureau on financial intermediation among the commercial banks in Kenya. The study uses a descriptive survey research design. The study population consists of all the 45 commercial banks licensed by the central bank of Kenya under the banking act as at 31st May 2019. The study adopts a census population approach to study all the banks. The study uses secondary data collected from annual supervision reports of CBK, and the respective bank's audited accounts relate to the total loans, total non-performing loans, and interest earned on investments. Also, the credit reports done annually by reference bureaus were used to obtain data for the period between 2010 and 2018. Quantitative data collect was analyzed using the latest SPSS software, version 22.0. The study applies both descriptive and inferential statistics. Results generated are then presented in tables and explanations given in prose. Inferential statistics included the Pearson correlation analysis and Correlational relationships among the number of loans offered defaulted loans and the interest earnings on loans by commercial banks bank in Kenya. Linear regression analysis was conducted to establish the significance of the variables. ANOVA was used to test the relationship between independent variables and dependent variable. The Chi-Square test was also performed. Both the mean of the study and the mean before the introduction of CRB were used to check if there is a statistical difference between the means. The study establishes that credit reference bureau checks have a role in the financial intermediation (non-performing loans) in commercial banks in Kenya. Further, the study found that non-performing loans have a negative correlation with credit reference bureau checks. It can, therefore, be concluded that a relationship exists between credit reference bureau information and the level of financial intermediation as shown through non-performing loans in Kenya commercial banks.

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