Influence of Loan Design on Loan Delinquency by Corporate Customers in Kenya

Delinquency refers to loan repayment rate while a loan is delinquent when a payment is late. Delinquency is measured because it indicates an increased risk of loss, warnings of operational problems, and may help predicting how much of the portfolio will eventually be lost because it never gets repaid. This study analyzed the influence of loan design on loan delinquency by corporate customers in commercial banks in Kenya. The study was motivated by the economic trend and behavior of corporate customers in Kenya which has been varying consistently with the decreasing rate of nonperforming loans. Hence, this analysis was built on the regression model where the relation between loan default and the Loan design was investigated to examine the relationship between these two aspects. The study used a survey study where a questionnaire is to be administered to establish the effect of these factors. The study picked a sample of 9 banks on a twenty percent basis of the banking population in Kenya. The study found out that Loan design affects the rate of defaulting by corporate clients highly as expressed in the findings of the study. The study recommended that the management of the financial institutions involved in the banking sector should ensure that the purpose of the different loans offered is pre-determined and enforce the implementation of the same through close supervision and monitoring of the banks officers to the usage of the borrowed funds from the bank, this will significantly reduce the rate of delinquency thus enhancing growth of the commercial banks.