Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271525 
Year of Publication: 
2023
Series/Report no.: 
KBA Centre for Research on Financial Markets and Policy Working Paper Series No. 64
Publisher: 
Kenya Bankers Association (KBA), Nairobi
Abstract: 
Globally, credit scoring adoption has been on the rise on account of increased access to data, computing power, and the need for efficient credit allocation that is supportive of entrenching financial inclusion and economic growth. Relatedly, the adoption of risk-based pricing has gained traction, and, in this paper, we use annual bank level and macroeconomic data spanning the period 2003-2021, to estimate a panel model assessing the drivers of price of credit. Credit pricing in Kenya is affected by the bank size, credit risk, and efficiency among others. In particular, the larger the size of the bank, the lower the price of credit. Overall, the results reveals that the implementation of riskbased pricing will be heterogenous and dependent on bank-specific characteristics and internal policies, while the macroeconomic environment will have a negligible role on the credit prices determined by the banks.
Document Type: 
Working Paper

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