COMPETITIVE INFORMATION SHARING AND CREDIT SCORING ON THE PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Oira Sammy Machoka - PhD Student, Kenyatta University, Kenya
Dr. Ambrose Jagongo - Lecturer, School of Business, Kenyatta University, Kenya
ABSTRACT
Many banks in Kenya have been experiencing poor financial performance. Most of these financial problems arise from lack of credit information on the loan applicants which then affect their ability to recover both the principle and the interest. There have been efforts by the Central Bank of Kenya to advance credit information sharing on loan applicants among commercial banks so as to reduce the default rates among loan beneficiaries. This study aimed to establish the effect of of competitive information sharing and credit scoring on the performance of commercial banks in Kenya. This study employed a descriptive research design. The study was anchored on information asymmetry theory, moral hazard theory and financial intermediation theory. The population of this study entailed all the 43 commercial banks licensed under the banking Act as at 31 December 2015 in Kenya. The study used primary and secondary data. Primary data was collected using closed ended questionnaires administered on drop and pick method while secondary data was collected from CBK annual supervision reports and the banks specific audited accounts. Data was analyzed using both descriptive and inferential statistics. The qualitative data collected was analyzed using descriptive statistics such as mean, standard deviation, frequencies and percentages while inferential statistics including multiple regression analysis was performed to estimate the changes in performance following changes in credit information sharing variables. Tables and charts were used to present the analyzed data. From the findings, competitive information sharing has significant effect on performance of Commercial banks. Credit scoring has significant effect on performance of Commercial banks. The study recommends that the top management of all commercial banks in Kenya should strengthen their channels and systems of sharing information which shall significantly influence performance. The top management team of Credit Reference Bureau CRB in Kenya should improve on their credit monitoring role in the country to allow generate effective scores that commercial banks use for lending purposes.
