INFLUENCE OF CENTRAL BANK REGULATION ON PERFORMANCE OF LOAN REPAYMENT OF COMMERCIAL BANKS BRANCHES IN KAKAMEGA COUNTY, KENYA
Abstract
This study investigated whether CBK regulations have influence, if any on level of loan repayment in commercial bank branches in Kakamega County, Kenya. Further, it explored the influence of capital regulation, credit regulations, interest rate gap regulations and liquidity regulations by linking them to performance of loans repayment. Descriptive research design was used. The population of 211 employees in 15 commercial banks branches in Kakamega County was targeted. A sample of 136 employees was selected through stratified random sampling technique. Data was collected using structured questionnaire, SPSS used to analyze data and presented using tables. There was significant relationship between capital regulations (r=0.419, P=0.000), liquidity regulations (r=0.506, P=0.000), interest rate capping (r=0.424, P=0.000), credit regulation (r=0.373, P=0.000) and performance of loan repayment. Multiple linear regression results revealed that CBK regulations had a significant influence on performance of loans repayment of commercial banks in Kakamega County. Up to 36.8% (r2=0.368) of the variance in performance of loans repayment was significantly accounted for by CBK regulations. Therefore, the study concluded that CBK regulations have positive significant influence on the performance of loan repayment of commercial banks branches in Kakamega County. Improvement in credit regulations, liquidity regulations, capital regulations and interest rate capping would results to increase in loan repayment performance. Therefore, the study recommended that there was need for CBK to enhance prudential regulations to prevent further bank crises. The study also recommended that commercial banks must comply fully with the stipulated regulations and the Central Bank must ensure that all banks comply. Implementing regulations would enable the regulator to discover banks that are struggling and provide remedial measures before they collapse and depositors lose their money.
Key Words: Capital Regulations, Liquidity Regulations, Interest Rate Capping, Credit Regulation, Loans
CITATION: Ofwamba, C. S., & Miroga, J. (2018). Influence of central bank regulation on performance of loan repayment of commercial banks branches in Kakamega County, Kenya. The Strategic Journal of Business & Change Management, 5(4), 1994-2014.
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.1006
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