The effect of non-performing loans the financial performance Of commercial banks in Kenya

This study was carried out with objective of finding out whether the commercial banks in Kenya \nhave had their profitability impacted significantly by non-performing loans. The findings were that \nalthough banks are impacted by non-performing loans (which form part of their expenses), the \nimpact were not adverse enough to affect the growth of the return on assets negatively. What this \nsimply meant was that in Kenya, as banks continued to increase their non-performing loans, it \nresulted in increase in the loan book. Simply put, it seemed that non-performing loans was an \ninevitable price to pay for increase in the loan book and the returns thereof. Commercial banks in \nKenya should focus more on reducing the level of non-performing loans in their portfolio so as to \nreverse the current status quo where as non-performing loans seem to be moving in the same \ndirection as the loan book. \nThe increase in the loan book for most banks and consequently the growth in profitability was \nattributed to the considerable economic growth noted in the African economy which has \nstrengthened the development of many sectors in the economy mainly as a result of increased \ninvestor confidence on the future of the African market.