Collateral Security as A Determinant of Commercial Banks Financial Performance

Abstract

Despite of implementing a number of determinants to improve financial performance of Commercial Banks, Banks still declare deficit on the outcome of operation in Kenya today hence need for further study. The purpose of this study was to investigate the effect of collateral security as a determinant of Commercial banks financial performance in Kenya. Mixed method which comprised of quantitative and qualitative designs was applied in this study. Target population was one hundred and seventeen (117) managers from 39 licensed commercial banks of Kenya. Cronbach Alpha test of 0.869 was obtained indicating the reliability of the research instrument. Content and criterion validity were ensured through incorporating the experts’ suggestions in the final paper. Data was analyzed using descriptive statistics and inferential statistics. A strong positive statistically significant relationship between collateral security and financial performance was obtained. This enhances the understanding of the commercial banks that, the practice of taking collateral security before a loan is issued does not only give them confidence that loans will be repaid but also contributes towards improving financial performance therefore a variety of collateral security should be considered.