Determinants of Lending Behavior in Selected Commercial Banks in Kenya
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Date
2026-03-23
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International Journal of Economics, Commerce and Management United Kingdom
Abstract
The study determined the effect of volume of deposit and interest rate on total loan advanced by
selected commercial banks in Kenya. The study employed a correlation research design and
was informed by theory of Money Supply. The population of study constituted all the ten banks
listed at the Nairobi Securities Exchange (NSE) as at the year 2012. A census technique was
used to constitute a sample size of nine commercial banks. The study focused on a ten-year
period analysis (2002-2011) of the comprehensive financial statements of the sample size and
adopted an econometric approach to test the degree of correlation between the variables by
employing the multiple regression analysis of the Ordinary Least Square (OLS) method. The
findings indicated that lending interest rates are negatively related and significantly affect the
total loans advanced. Further, volume of deposit in commercial banks has a significant and
positive effect on the total loan advanced. Therefore, commercial banks must innovate ways of
increasing their profit through fee incomes and commissions since incomes from interest rate
tend to decline with increase in the lending interest rate.
Keywords: Total Loans, Lending Interest Rates, Volume of Deposit, Commercial Bank, Banking