Non-performing loans can be defined as credit facilities which do not generate returns. The role played by non-performing loans in triggering banking and financial crises in both most developed and least developed countries widely acknowledged. The aim of the study was to examine the effect of selected macro-economic variables on non-performing loans in commercial banks in Kenya for the period January 2005 to December 2010. Specifically, the study sought to determine the effect of nominal interest rate, nominal inflation rate and nominal exchange rate on no-performing loans. The study used time series data to model the relationship between non-performing loans and selected macro-economic var
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