Evaluation of the Factors Leading to Loan Default at Equity Bank, Kenya
Date
2015Author
Zablon, Evusa
Sambiri, Mudaki John
Otieno, Ojala Daphen
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This paper gives an evaluation of the causes of loan default among the customers of Equity bank. A sample of 80
respondents out of 240 respondents which comprised of both the bank managers and loan defaulters at Equity
Bank was used in the study. This represented 33% of the target population. The population was stratified into
bank managers and loan defaulters while loans were stratified into performing and nonperforming loans. Data
was collected using two sets of questionnaires which were administered separately to the target population. Data
was analyzed using Microsoft Excel Data Analysis Tools. In the evaluation of the causes of nonperforming loans,
the paper considered the contribution of the factors such as the banks’ lending practices as well as the economic
backgrounds and financial decision making among loans recipients at Equity Bank Ltd. Microsoft Excel Data
Analysis Tools were used to establish the relationship between amounts of loan advanced to an individual and
the amount of loan defaulted. The paper established that the major factors influencing nonpayment of borrowed
loans at Equity Bank Ltd were both internal and external. The paper recommended that banks’ credit policies be
reviewed to match the highly volatile economic trends within financial markets with a strong emphasis on
institutional appraisals on credit worthiness.
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