Issuance of loan is fundamental for economic growth and development of any economy. The loan portfolio both domestic and foreign plays a major role in funding the nation and its citizenry towards achieving a stable economy. The research problem was the influence of economic variables in non-performing loans in bank in Kenya. A case of selected bank funded projects in Nairobi County. The objectives of the study were to determine the influence of Gross domestic Product, inflation rate and foreign exchange rate on non-performing loans in bank funded projects. The researcher used descriptive research design and the research instrument was questionnaires. The target population were projects that had defaulted from repaying their loans within a period of ninety days after the loan maturity period. This information was drawn from 160 respondents with sample size of 114 which were picked by Yamane formulae technique. The study employed simple random sampling and stratified sampling techniques which were used when selecting the number of respondents. Descriptive data analysis involved presenting the means, percentages, frequencies and standard deviations of core variable of interest. The analysis of non-numerical data was done in line with the objectives and reported in narrative form. The generalization and prediction of data using correlation and regression analysis determined the relationship between variables. The regression analysis determined the influence of selected economic aspects on nonperforming loans in bank funded projects. Information on credit risk was sourced from survey questionnaires and annual banks supervision reports by CBK, while data on macroeconomic variables from the statistical bulletins of CBK and KNBS. The Reliability test was 0.89 hence this was considered reliable for further test and analysis. Multiple regression models were applied to ascertain the existence of a long run effect by the selected variables on the non-performing loans in bank funded projects. Pearson’s correlation coefficient was applied to test and build up the strong negative relationship that exists between Gross Domestic Product, (r - 0.0524) and non-performing loans. The correlation results indicate a positive relationship between inflation rate (r 0.0284) and non-performing loans while there is a strong positive relationship between foreign exchange (r 0.1973) onto the NPLs in bank funded projects in Kenya. From data collected spanning from 2008 to 2018 the study concluded that certain economic variables do influence the rate of loan performance in Kenya. The study recommends that the Government of Kenya in consultation with the private sector should come up with policies that would help curb the rate of non-performing loans in Kenya. Banks should be able to flag potential risk in their loan portfolios which will enable mitigation and making right decisions so as to improve the loan recovery rate. Further research should be conducted so as to comprehend the long run impact of nonperforming loans in the banking sector as well as the economy of Kenya.

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