RELATIONSHIP BETWEEN CAPPED LENDING RATES AND NON-PERFORMING LOANS ON LISTED COMMERCIAL BANKS IN KENYA

Abstract

The study sought to determine the relationship between capped lending rate and non-performing loans among the listed commercial banks in Kenya. The data for the study was collected from the period 2013 to 2017 from five listed commercial banks in Kenya. The research tested the null hypotheses that capping the lending rate has no significant relationship on non-performing loans of the sampled banks. The study adopted the quantitative research design to test the null hypotheses. The Pearson correlations results indicated that capped lending rate has no significant relationship on the non-performing loans. In conclusion the negative correlation can be attributed to fact that borrowers continue to repay the old loans (acquired before capping) the same scheduled payments before capping, reducing the duration of the loan and not amount payable on monthly basis. The recommendation is for such studies to be conducted on continuous basis for the next five years and advice the government on whether to drop or retain the cap for purpose of sustainable economic development in Kenya.