The Relationship Between Credit Reference Bureau Services And Financial Performance Of The Commercial Banks In Kenya A Survey Of Commercial Banks In Meru County

ABSTRACT

The aim of this study was to establish the relationship between credit reference bureau services and financial performance of commercial banks in Meru County. Information about the credibility level of potential borrowers is unavailable and most of the potential borrowers come from less fortunate backgrounds. A large number of them have never borrowed from commercial banks in the past and pledging collaterals to guarantee payment of the loans they intent to borrow is a challenge. Sharing credit information gives people the opportunity to offer affordable credit access as the search costs and risk premiums are significantly lowered. However, CRBs have gained bad publicity as at times the credit information they offer is inaccurate. This study attempted to establish the association between credit reference bureau services and financial achievement of the commercial banks in Kenya. Banks’ financial performance was compared against customer information sharing, credit scoring, market research and information capital. Information sharing theory, moral hazard theory and consumer behavior theory were used to relate the CRB services and bank financial performance. The study applied descriptive research design. This design was usable to answer the questions concerning relation between credit reference bureau services and the financial achievement of commercial banks in Meru County. The study was census and focused on eighteen commercial banks operating in Meru County. The study used self-administered questionnaires to collect the data. Statistical package for social sciences (SPSS) was used in data processing and analysis. Descriptive statistics and multiple linear regression model were used for analysis. Tables and Summary reports were used to present the data. It was found that information sharing and credit scoring has meaningful effect on Banks’ financial performance. The study would be a great contribution to the existing body of knowledge especially for researchers who may use this research in furthering their research through reviewing the literature in the area to establish the existing gap.