Analysis on Influence of Bank Specific Factors on Non-Performing Loans among Commercial Banks in Kenya

Occurrences of banking financial crises as well as commercial bank failures in Kenya are usually associated with elevations in accumulation of non-performing loans. This study therefore analyzed the influence of bank specific factors on the level of non-performing loans among the commercial banks in Kenya. This study employed descriptive research design using the forty-three (43) currently licensed commercial banks as its target population. Using census, the study collected secondary data from the previous year’s financials statement and other financial reports for period covering 2012 to 2016. Quantitative analysis was used to produce descriptive statistics and inferential analysis carried out to predict a study model for estimating Non-Performing Loans in terms of banks related factors. The study revealed that the average level of NPLs among Kenyan commercial banks is higher than the threshold of 5% signaling a serious NPLs problem amongst commercial banks in the country. The study concludes that at 5% level of significance; interest rate spread has positive significant influence on NPLs; operating efficiency is directly proportional to non-performing loans and it has a moderate positive significant influence on the non-performing loans among commercial banks in Kenya; liquidity ratio has a negatively low significant relationship with non-performing loans.; and return on assets has a negative significant influence on NPLs among commercial banks in Kenya. ROA has a negative impact.