Credit Management And Financial Performance Of Selected Airlines In Kenya

ABSTRACT

Sound credit management is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. Firms must therefore ensure that the management of receivables is efficient and effective. On that basis, it is simply good business to put credit management at the front end by managing it strategically. Therefore this study sought to establish the effect of credit management on financial performance of selected airlines in Kenya. The study specifically sought to determine the effect of credit control system, management of bad debts, pre-borrowing evaluation and borrowing approval process on financial performance of selected airlines in Kenya. The study adopted a cross sectional descriptive survey design because it provides a clear outcome and the characteristics associated with it at a specific point in time. The target population for the study was three hundred and sixty nine employees in the selected seventeen airline companies locally licenced to operate in Kenya. Two senior employees in credit and accounting/finance departments in the seventeen local airline companies in Kenya were interviewed since these were the people with relevant knowledge on credit policies. The study adopted a census technique to select the respondents from the population. This comprised one senior staff from each department for the seventeen Airline companies with total respondents being sixty eight. The study obtained secondary data through a data collection form that indicated the performance of the selected airline companies. However, a semi- structured questionnaire was used to collect primary data. The researcher employed self-administration style of data collection. Responses in the questionnaires were tabulated, coded and processed using a computer Statistical Package for Social Science program. The relationship between the dependent variable and the independent variables were tested using multiple linear regression models. . The findings of the research show that borrowing approval process was the most influential variable affecting financial performance of airline companies in Kenya. Credit control system is the least influential variable affecting financial performance of selected airlines in Kenya. The study recommends the creation and strengthening of independent credit management authority to oversight and monitor best credit management practices in the airlines and even provide technical advice to the Airline companies when necessary. The researcher recommends a further research on the impact of non-performing loans on financial performance of airline companies in Kenya.