Influence of Loan Approval Practice on Financial Performance of Commercial Banks in Kisii County, Kenya
DOI:
https://doi.org/10.58425/ajfbm.v4i1.366Keywords:
Loan approval, financial performance, commercial banks, Kisii County, online banking platformAbstract
Aim: This study examined how specific digital loan approval practices such as automated credit scoring, digital customer onboarding, electronic Know Your Customer (e-KYC) procedures and the use of mobile and online banking platforms impact the financial performance of commercial banks in Kisii County.
Methods: A descriptive survey design was employed. Stratified random sampling was used to select a sample size of 107 employees. Closed-ended questionnaires were used in collecting primary data from 107 employees across 16 banks. Annual reports were extracted from the Central Bank of Kenya (CBK). Financial performance data was triangulated from the responses given from 2016 to 2020. The study used descriptive and inferential statistics, including multiple and hierarchical regression analysis.
Results: The results revealed a significant negative relationship between loan approval practices and financial performance. This indicating that inefficient or overly strict approval processes contributed to lower financial outcomes for the banks.
Recommendation: The study recommended strengthening digital loan approval processes by enhancing the integration of credit rating assessments and credit bureau checks. Improvements to technological infrastructure are needed to ensure smooth access to updated credit data, addressing concerns about transparency and fairness.
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