Effect of Credit Diversification on Financial Distress Prediction of Commercial Banks Listed At the Nairobi Securities Exchange, Kenya

Abstract

: The study sought to determine the effect of credit diversification on financial distress prediction of commercial banks listed at the Nairobi securities exchange.The study used a cross sectional and time series research design and the target population for this was eleven listed commercial banks. A sample size of seven listed Commercial Banks was be used. Simple random sampling techniques were used in the study. Primary data was collected using interview guide while secondary data was collected from Banks’ books of accounts. Inferential statistics were used in data analysis. Regression results revealed that credit diversification had (β =. - 438, p = .034, < .05). The study concluded that credit diversification has a significant effect on financial distress prediction.Credit diversification activities have reduced the probabilities of default on the side of borrowers through introduction of new types of credit facilities. Credit risk can be reduced through specialization of lending.The study recommended that the management of banks should introduce new types of credit facilities to increase on their credit portfolios. Besides, the management of banks should reduce on credit risk through specialization of lending