Credit policy and financial performance of commercial banks in Kenya

The study sought to investigate the effects of credit policy on financial performance of commercial banks in Kenya. Specifically the research sought to examine the relationship between loan terms and conditions and financial performance, and to determine the relationship between credit information and financial performance. The problem of the study was that some commercial banks use stringent credit policy thus losing customers to other banks with lenient credit policy, this has led to decline in performance of such banks. The study was carried out using descriptive research design. The population for the study was all the forty three commercial banks headquarters located within Nairobi CBD. Primary data was collected through the use of close-ended questionnaire, drop and pick procedure was used to collect the instrument. The target population was credit officers of the commercial banks in Kenya. Descriptive and inferential statistics were used to analyze the data. . The results shows that the nature of loan terms and conditions has a large effect on the bank’s competitiveness, the study also found that most commercial banks rely to a large extent on the borrower’s credit history in awarding loan amounts. The results shows that credit policy positively affect the performance of commercial banks.