Effect of Growth and Quality of Credit on Loan Loss Provisioning Decisions of listed commercial banks in Kenya
DOI:
https://doi.org/10.17613/h8a1-jd25Keywords:
Loan Loss Provision, Loan Growth, Quality of LoansAbstract
This study aimed at examining the effect of loan growth and credit quality on loan loss provision of commercial banks in Kenya. The study employed descriptive research survey design. The target population of the study encompassed 11 listed commercial banks in Kenya. All the 11 listed commercial banks in Kenya formed the sample size as the study was a census of listed banks in Kenya. Secondary data was extracted from CBK Annual reports and Audited financial statements of individual listed commercial bank in Kenya. Both descriptive and inferential statistics were used. Inferential analysis involved; correlation analysis to test the relationship between banks’ growth and quality of credit and loan loss provision of commercial banks in Kenya. Simple OLS, REM and FEM models were used to establish the causal effect relationship between independent variables and loan loss provision of listed commercial banks in Kenya. The findings show that quality of loans had a statistically significant effect on loan loss provision. However, the effect of loan growth on loan loss provision was not statistically significant at 5% level of significance. The study recommends to the management of listed commercial banks to take into consideration their quality of loans when setting loan loss provisions to cover any eventual loan losses.
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