CHALLENGES OF CREDIT CREATION BY COMMERCIAL BANKS IN KENYA: AN EMPIRICAL REVIEW
CHALLENGES OF CREDIT CREATION BY COMMERCIAL BANKS IN KENYA: AN EMPIRICAL REVIEW
Timothy Cheruiyot Bett
Tabitha Nasieku
ABSTRACT
The paper delved in an empirical review to assess the challenges of credit creation by commercial banks in Kenya. The findings indicated that though regulations, laws and requirements aim at ensuring the stability of the banking sector, it is notable that literature supports their negative influence in credit creation by commercial banks. In addition to the systematic challenges (regulations, laws and requirements), other challenges that are act externally to the banking sector, specifically, economic structure driven challenges such as high interest rates, fluctuating exchange rates multi-currency economy among others affect credit creation by commercial banks. The analysis determined that despite the fact that regulations, rules, and requirements seek to ensure the stability of the banking sector, it is noteworthy that literature supports the detrimental effect that regulations, laws, and requirements have on commercial banks' capacity to create credit. Other challenges that act externally to the banking sector, specifically economic structure driven challenges such as high interest rates, fluctuating exchange rates, multi-currency economies, and others, affect credit creation by commercial banks. These challenges are in addition to the systemic challenges.
