Effect of Selected Factors on Non-performing Agricultural Loans in Commercial Banks in Kenya
Boiyon Geoffrey Kibet,
Richard Nyaoga,
Robert Kingwara
Issue:
Volume 6, Issue 5, October 2020
Pages:
90-95
Received:
25 July 2020
Accepted:
18 August 2020
Published:
19 September 2020
Abstract: Commercial banks plays a crucial role in the Agricultural sector in advancing farmers affordable credit to improve their productivity, enhancing their food security, and expanding their income. Financing of the sector however continues to get the lowest levels of credit in Kenya compared to other sectors due to poor loan repayment. This study aimed to establish the effect of macro-economic factors of Gross Domestic Product (GDP), Real Effective Exchange Rate, and the Lending rate on Agricultural Non-performing Loans (NPL) and to assess the effect of Growth in Loan Portfolio on Agricultural NPL. Secondary data relating to Commercial Banks lending to the agricultural sector for a period of 7 years from 2011 to 2017 was collected from forty-two Commercial Banks in Kenya. Results showed that agricultural NPL had a strong positive correlation with real GDP (0.836, p<0.001), the Real Effective Exchange rate (0.865, p<0.001), and a weak inverse correlation with the average Bank Lending rate (-0.48, p<0.01). The study concluded that commercial banks should pay close attention to the two factors (Gross Domestic Product and Real Effective Exchange rate) when providing loans to the agricultural sector to reduce the level of impaired loans. The banks active in agricultural lending should, therefore, take the performance of the real economy into account when extending loans given the reality that loan delinquencies are likely to be higher during periods of economic boom as suggested by the study results. Equally Commercial banks should trade with high prudence to curb a possible impairment due to reckless lending and over-estimation of the borrower’s ability to pay back. They should constantly review the complexity and diversity of the new loans to the agricultural sector periodically like quarterly, and do aging analysis to ensure that the growth in agricultural loans do not serve to window dress the portfolio at risk percentage while the actual amounts in default are increasing.
Abstract: Commercial banks plays a crucial role in the Agricultural sector in advancing farmers affordable credit to improve their productivity, enhancing their food security, and expanding their income. Financing of the sector however continues to get the lowest levels of credit in Kenya compared to other sectors due to poor loan repayment. This study aimed...
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Influence of Sacco Lending Rates on Dividend Payout Among DT Saccos in Kenya
Solomon Munyoki Kathuo,
Oluoch Oluoch,
Agnes Njeru
Issue:
Volume 6, Issue 5, October 2020
Pages:
96-101
Received:
15 September 2020
Accepted:
22 October 2020
Published:
30 October 2020
Abstract: This study explored the influence of sacco lending rates on dividend payout among saccos in Kenya. The study was motivated by inconsistency in the ability of Saccos to live up to their promise of paying dividends to members. There are variabilities in dividend payout based on different sacco sectors. Saccos pay dividends on a different percentage from the previous year. Different saccos have varying rates of interest charged on loans lend to members. The present study targeted all registered DTSSaccos in Kenya (n=179) over an eight-year period (2012-2019). The study used panel data. Descriptive results showed that Sacco Lending interest rates which reflect the capacity of saccos to generate income, which they could distribute as dividends were on a downward trend, between 2012 and 2019 and large scale saccos had highest rates. Indeed, small saccos use dividends as a business strategy to retain and attract new members, thereby augment their capital. The findings from this study are useful to the board of directors and management team of companies in deciding an appropriate lending rate for the company. The results are also useful to shareholders in making investment decisions. The study extends empirical evidence on dividend policy determinants which are currently reported to be inconclusive. In addition, the study fills the lacuna in the existing literature by focusing on the issue of dividend policy determinants in the context of an emerging sector, namely saccos.
Abstract: This study explored the influence of sacco lending rates on dividend payout among saccos in Kenya. The study was motivated by inconsistency in the ability of Saccos to live up to their promise of paying dividends to members. There are variabilities in dividend payout based on different sacco sectors. Saccos pay dividends on a different percentage f...
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