The Effect of Credit Risk Management Practices on Financial Performance of Deposit Taking Saccos in Kenya

Abstract

Deposit-taking SACCOs have become important players in the financial sectors and are contributing meaningfully to the overall economy; hence their ability to achieve their set objectives and keep solvent should be of importance to all interested parties. The goal of this research was to establish the effect of credit risk management practices on the financial performance of deposit-taking SACCOs in Kenya. The study adopted a descriptive cross-sectional survey research design, primary and secondary data were collected and used, the respondents were heads of credit risk management functions of 41 deposit-taking SACCOs in Kenya. Quantitative analysis was analysed through descriptive statistics such as percentages and frequency counts. Findings from the research revealed a positive relationship between the independent variables (credit risk management practices) and the dependent variable (financial performance) of deposittaking SACCOs in Kenya. From the findings and conclusion, the study recommends that organizations should enhance credit risk management practices which include portfolio asset quality/portfolio management, SACCOs loan policy procedure, risk monitoring, risk analysis and assessment, credit scoring mechanism.