The Effect of Debt Recovery Techniques on Financial Efficacy of Commercial Banks in Nairobi County, Kenya

Abstract

This study examined the relationship between debt recovery techniques and financial efficacy of listed commercial banks in Nairobi County, Kenya. This study was anchored on asymmetry information theory. The target population comprised of 385 commercial banks senior management staff. The sample size was 196 respondents using Yamane formula. Data was gathered at listed commercial banks headquarters in Nairobi. Descriptive research design was adopted. This study utilized probability sampling procedures to sample target groups to avoid any form of bias. Primary data was obtained directly from respondents using closed ended questionnaires while secondary data was obtained from published financial reports of the listed commercial banks in Nairobi County, Kenya. Reliability was measured by Cronbach’s alpha and all the variables met the minimum threshold of 0.7. The collected data was analysed using multiple regression models. IBM SPSS Statistics 27 was used in analysing correlations amongst the variables. Based on the findings of the study, it was concluded that debt recovery management significantly influenced financial efficacy of listed commercial banks in Kenya. Therefore, the study recommends that for commercial banks to remain competitively profitable they should employ multiple debt recovery techniques which would help them in making sound decisions about debt recovery techniques. The study also recommends that debt recovery techniques employed by banks should focus more on strategic issues on how bad debts may be gotten rid of to avert financial crisis among the listed Commercial Banks.