Influence of Credit Risk Monitoring on Lending Performance of Commercial Banks in Nairobi County, Kenya

The credit risk poses a significant exposure not only to the banks but also to the entire economy, which is evident in east Africa financial crises. This is because of the fact that the banking is a vital industry of any economy. There has been a dramatic loss in the banking industry and suddenly announced large losses due to credit exposures that turned sour. This emphasizes the importance of managing the credit risk within the banking sector. Lending is a very profitable activity of the bank since customer pays interest on the amount borrowed. But this profitable activity also has problems which arise as a result of delayance or default in loan repayments which can be so extended and interconnected. The general objective of this study was to evaluate the influence of credit risk monitoring on lending performance of commercial banks in Nairobi County, Kenya. This study used descriptive survey research design and the target population for this study was at two levels. The target population was employees of the 42 commercial banks in operation in Kenya as at 1st January, 2018. Primary data was collected using questionnaires that have both structured and unstructured questions. The researcher analyzed the data using descriptive statistics and logistic regression analysis (binary) was used. The results of the study revealed that the combined effect of credit risks monitoring activities influenced bank lending performance positively. The study concludes that credit risk monitoring activities significantly influence the lending performance of commercial banks and this has affected the performance of the entire sector. The study recommended that KBA and CBK should make it a requirement that borrowers should be submitting reports regularly to the bank on changes in the value of collateral which was used to acquire loan.