TABLE OF CONTENTS
Declaration .................................................................................................. .i
Approval.. .................................................................................................... .ii
Dedication ................................................................................................ .iii
Acknowledgement. ....................................................................................... v
Table of contents ............................................................................................. v
List of tables/ figures ............................................................................................ v
Abstract. ....................................................................................................... x
CHAPTER ONE ........................................................................................... I
1.0 introduction ............................................................................................ I
1.1 Background of the study .............................................................................. 1
1.2 Statement of the problem ............................................................................ I
1.3 Purpose of the study .................................................................................... 2
1.4 Research objectives ................................................................................... 2
1.5 Research Questions ................................................................................... 2
1.6 Scope of the study .................................................................................... 3
1.7 Significance of the study ............................................................................. 3
1.8 Conceptual framework ............................................................................... 4
CHAPTER TWO ............................................................................................ 5
LITERATURE REVIEW ................................................................................. 5
2.0 Introduction ............................................................................................ 5
2.1 Credit policy concepts ................................................................................ 5
2.1.1 Credit standards and analysis ...................................................................... 6
2.1.2 Credit tenns .......................................................................................... 7
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2.1.2.1 Determinants of credit terms in commercial banks ........................................... 7
2.1.3 Collection policy .................................................................................... 8
2.1 .4 Consumer bank credit.. ............................................................................ 9
2.2 Effects of credit policy on performance of commercial banks ................................ 10
2.2.1 Importance of credits .............................................................................. 12
2.2.2 Costs associated with credit policy .............................................................. 12
2.3 The relationship between credit policy and performance of commercial banks ............ 13
2.3.1 Reducing the rate of defaulters ................................................................... 13
2.3 .2 Maintaining liquidity ........................................................................... ... 14
2.3.3 Maintains a favourable speed .................................................................... 14
2.3.4 Enhances customer growth ...................................................................... .15
CHAPTER THREE ...................................................................................... 16
METHODOLOGY ....................................................................................... 16
3.0 Introduction ........................................................................................... 16
3 .1 Research design ...................................................................................... 16
3.2 Study population ..................................................................................... 16
3.3 Sampling design ..................................................................................... 16
3.4 Data sources, collection and analysis ............................................................. 17
3.4.1 Data sources ....................................................................................... 17
3.4.2 Data collection methods and instruments ................... : ..................................... 17
3.4.2.1 Interviewing methods ........................................................................... 17
3.4.2.2 Questionnaire methods ......................................................................... 17
3.5 Data processing and analysis ...................................................................... .17
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3.5.1 Editing ............................................................................................... 17
3.5.2 Coding .............................................................................................. 18
3.5.3 Tabulation .......................................................................................... 18
3.6 Limitations of the study ............................................................................. 18
CHAPTER FOUR ....................................................................................... 19
DATA PRESENTATION .............................................................................. 19
4.0 Introduction .......................................................................................... 19
4.1 Bio data ............................................................................................... 19
4. 1.1 Respondents Designations ...................................................................... 20
4.1.2 Respondents by age, sex and education level.. ................................................... 21
4.1.3 Length of service .................................................................................. 23
4.2 Existence and the use of credit policy in Barclays bank ....................................... 24
4.2.1 Market definition .................................................................................. 24
4.2.1.1 Barclays bank investment portfolio as defined by the market. ........................... 25
4.2.1.2 Existence of written policy and its review ................................................... 25
4.2.2 Credit initiation .................................................................................... 27
4.2.2.1 Credit origination in Barclays bank ........................................................... 28
4.3.2.2 Credit evaluation in Barclays bank ........................................................... 28
4.3.2.3 Credit negotiation process in Barclays bank ................................................ .30
4.3.3 Credit documentation and disbursement. ..................................................... .30
4.3.4 Portfolio management in Barclays bank ...................................................... .31
4.3.4.1 Loan loss reserve account ...................................................................... 32
4.3.5 Credit culture ...................................................................................... .33
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4.4 Effects of credit policy on the performances of commercial banks ........................... 33
4.4.1 Clients position on the banks' credit policy .................................................... 33
4.4.2 Barclays bank recovery rates ..................................................................... 33
CHAPTER FIVE ......................................................................................... 36
SUMMARY OF THE FINDINGS, CONCLUSION AND RECOMMENDATIONS ......... 36
5.0 INTRODUCTION ................................................................................... 36
5.1 SUMMARIES OF MAIN FINDINGS OF THE STUDY ..................................... 36
5.1.2 Various credit policy variables undertaken by the bank ..................................... 36
5.1.3 Establishing the effect of credit policy on the performances of commercial bank ...... .36
5.1.4 The relationship between the credit policy and performances of commercial banks .... 37
5.2 conclusion ............................................................................................. 37
5.3 Recommendations ................................................................................... 38
5.4 Issues for further research .......................................................................... 39
REFERENCES ........................................................................................... .40
APPENDIX A: QUESTIONNAIRES TO MANAGEMENTS ................................... .41
APPENDIX B: TIME FRAME ....................................................................... .46
APPENDIX C: PROPOSED BUDGET ESTIMATE ............................................... 47
ABSTRACT The research study was undertaken on the effect of credit policy on performance of commercial banks. The main objectives of the study/Research was to establish the relationship between credit policy and performance in commercial banks and also to determine the various credit policy variables that the bank can implement to manage its credit properly and worthiness of their customers used by Barclays bank, Garissa branch to examine the relationship between the two variables. Credit is a set of policy actions designed to minimize costs associated with credit while maximizing the benefit from it. The objective of this policy is to have optimal investors in debtors. An optimal investment where there is trade-off between the benefit and cost associated with it. In other words the optimal level of investment, both objectives of profitability and liquidity are realised. The techniques used in the collection of the data were questionnaire and face to face interview. The data collected was coded, edited and tabulated with the help of tables and percentage that were essential techniques in presenting and analyzing the data. From the findings of the study it was noted that the credit initiation process has a significant effect on the performance of the bank. This implies that if the credit initiation is effectively carried out, the performance of the commercial banks would be enhanced. Also noted in the findings are that the recovery rates of Barclays Bank is high. This has been attributed to the credit evaluation procedures and close supervision of customers due to enough available credit officers. It was however recommended that it's important for a commercial banks to determine its investment portfolio and know the risk implication of the portfolio. The bank should be aware of all factors that have impact on their investment decision and try to control those that are internal, that is within the bank. The bank should then be able to decide on its clients as well as their management in order to get a well perfonning portfolio. Also recommended was in the assessment of a client, the banks should look at all the elements of the credit policy management and to ensure that they all were well done. This may include proper customer's infonnation, scrutinizing customer's performance, regularvisit, follow laid down rules, extending proper loans and ensure close supervision. This will help improve performance of Barclays Bank.
