EFFECTS OF COLLATERAL REQUISITE ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA:

Abstract

The aim of the study was to establish the effects of collateral requisite on financial performance of commercial banks in Kenya: a case study of KCB Mtito Andei branch. The objectives of the study were to examine the impact of collateral requisite on the credit risk management, to analyze the role of collateral in enhancing liquidity management and to identify challenges and barriers to effective collateral requisite. The research study adopted descriptive research design in form of a s survey and a sample size of 47 respondents was used. Stratified random sampling was used as all respondents were drawn from different levels. Structured questionnaires was developed in form of five point scale for data collection as it is cheap and saves time. The study found out that collateral had greater impact positively on the management of credit risk, transforming collateral and improving collateral liquidity and accurate valuation of collateral were the main effects of collateral requisite on financial performance of commercial banks in Kenya. The study recommends that there should be collateral education and awareness, tailoring od collateral policies for differentsectors, improving collateral valuation practices and reforming legal and regulatory frameworks.