Macroeconomic Determinants of Non-Performing Loans in Kenya: 1998-2015

Abstract

The study examined the Macroeconomic determinants of non-performing loans in Kenya. Time series data for periods 1998 to 2015 was analyzed using a linear regression model. The dependent variable was the ratio of non-performing loans to total loans. The independent variables were GDP growth rate, inflation rate, interest rate, exchange rate, remittances, unemployment rate and public debt. The empirical results indicated that inflation rate, interest rate, GDP growth rate, public debt, and exchange rate were not statistically significant while unemployment rate and remittances were statistically significant at 0.05 level of confidence. The study concludes that the significant macroeconomic determinants of non-performing loans in Kenya for periods 1998 to 2015 were remittances and the unemployment rate.

Keywords: Non-Performing Loans, Macroeconomic determinants, Inflation rate, Interest rate, GDP growth rate, Public Debt, Exchange rate, Unemployment Rate, Remittances