Effectiveness of loan default management strategies among commercial banks in Kenya: A survey of selected commercial banks in Nairobi city

This study explored the effectiveness of control strategies adopted by Kenyan commercial banks to manage loan defaults. Major objective of the study was to establish the level of effectiveness of loan default management strategies among Commercial Banks in Kenya: A survey of selected Commercial Banks in Nairobi City. The study used a descriptive survey design to obtain information on the level of effectiveness of loan default management strategies among commercial banks in Kenya. The population of the study mainly constituted the credit officers from the selected banks in the city of Nairobi. The population of this study consisted of Forty three (43) banks while the sample consisted of forty (40) credit officers from the commercial banks in Kenya (as at the end of year 2012) who were selected using the stratified random sampling technique. Primary data was collected from the senior credit officers while secondary was collected from the relevant secondary sources such as the Central Bank of Kenya website, and commercial bank publications as well as from the generally known information. The data was analyzed using descriptive statistics and Correlation analysis. The study findings indicate that, most commercial banks have an effective system for controlling loan default and thus

seldom do they require the services of CRB and therefore some banks (3.6 out of five) use CRB to recover defaulted loans. The study recommends that proper management of commercial banks should be instilled particularly in credit risk management as this will steer banks to high levels of profitability.