Influence of selected factors on public university employees borrowing from commercial banks; A case study of Egerton University

Abstract

Most if not all banks, rarely ask university employees to produce assets as securities before advancing loans to them. The employee payslip and assurance from the employer about cooperation in loan recovery is considered adequate. As a result of this commercial bank loans are easily accessed by most university employees. However it has not come out clearly what factors have influenced commercial bank borrowings. This study was aimed at evaluating the factors that have influenced commercial bank borrowing by public university employees. The study was conducted at Egerton University with an aim of establishing from employees what factors influenced them to borrow from commercial banks. The general purpose of the study was to determine the factors influencing public University employee borrowing from commercial banks. The specific objectives were to determine the level of commercial bank borrowing, identify the factors that influence bank borrowings and also determine me relationship between the factors and employee borrowing. Data was collected from a sample size of 318 employees which was selected through stratified random sampling from a total population of 1889 employees of Egerton University (as at December 2010). The collected data was analysed using descriptive statistic and inferential statistics. This study found that the use of loan (especially from commercial banks and SACCOs) is a very popular way of fmancing activities of salaried employees. The university employees borrowing from commercial banks is mainly influenced by the length of the repayment period and lack of guarantee other than the pay slip. This study recommends that commercial banks should try to lower the interest rates, increase the period of loan repayment and make the repayment terms flexible. The move by most commercial banks to consider the provision of loan facilities to public university employees without any other form of guarantee/security (assets) except the production of a pay-slip and assurance from the employer that the applicant for the loan is an employee of the institution and that the employer will recover the loan advanced through the check off system and remit the same to the bank is highly recommendable. Some of the commercial banks which have not embraced this lack of guarantee requirement (only pay-slip) should follow suite