THE EFFECT OF CAPITAL ADEQUACY ON THE LENDING PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract: Kenya's banking industry is one of East Africa's best known and has tremendous potential. Commercial banks play a crucial part in improving the transition of credit from surplus to deficit, thus promoting local economic activities. However, in recent times, banks have found that customers' credit efficiency has decreased, late payments, or bad debts has affected the bank's profits. Bad loans from commercial banks in Kenya continue to erode banks' profitability, hampering the financial performance of the industry. Therefore, this study sought to investigate the effect of capital adequacy on the lending performance of commercial banks in Kenya. To meet the study's objectives, an explanatory research design was adopted. In this study, the demography refers to the complete spectrum of institutions relevant to the examination. The report's primary audience was Kenyan banks. From 2016 to 2021, 39 banks were fully operational and used. Because the population is small, the entire population was studied. A subset of a study population is chosen for sampling. From 2016 to 2021, the study sample included thirty-nine fully operational Kenyan commercial banks. As a result, because it encompassed all business organizations in Kenya, the assessment was essentially a census. The model found a clear relationship between the investigation parameters. Accounting records from the banks and CBK statistical reports were used for this study. Capital adequacy as noted by the regression outcome signify an inverse significantly effect on loan performance of commercial banks in Kenya. The study concluded that capital adequacy provides the commercial banks with the platform for effective loan management options toward optimum performance in Kenya. The study recommended that that the size of the board should be determined by the companies listed strength as this is critical due to the fact that each company has unique tax planning goal hence the determination of the size of the board should be strengthen by each firm. Keywords: Capital Adequacy, Lending. Title: THE EFFECT OF CAPITAL ADEQUACY ON THE LENDING PERFORMANCE OF COMMERCIAL BANKS IN KENYA Author: Ronald Kipngeno Kirui, Dr. Robert Mugo International Journal of Social Science and Humanities Research ISSN 2348-3156 (Print), ISSN 2348-3164 (online) Vol. 11, Issue 2, April 2023 - June 2023 Page No: 256-261 Research Publish Journals Website: www.researchpublish.com Published Date: 24-May-2023 DOI: https://doi.org/10.5281/zenodo.7965917 Paper download Link (Source) https://www.researchpublish.com/papers/the-effect-of-capital-adequacy-on-the-lending-performance-of-commercial-banks-in-kenyaInternational Journal of Social Science and Humanities Research, ISSN 2348-3156 (Print), ISSN 2348-3164 (online), Research Publish Journals, Website: www.researchpublish.co