| dc.description.abstract | The objective of the study was to establish the relationship between credit risk management and non performing loans among SACCO's in Kenya. To satisfy the research objective, the study used causal design comprising of a sample of 30 SACCO's. Simple random sampling was used to select two respondents comprising of either Head of department, Credit manager or Credit officers among the candidate SACCO's. Primary data was collected using semi-structured questionnaires.
Some of the questionnaires were dropped and picked up later from the respondents, while others were sent and received via electronic mail. Once the relevant data was obtained, the researcher carried out an analysis of the same using mean scores, percentages and standard deviation. Statistical Package for Social Sciences (SPSS version 17.0) was adopted for the analysis while relational analysis was used to analyse the relationship among the variables.
The study established that there is a relationship between credit risk management and non-performing loans. Adoption of credit risk management practices results to declining levels of non-performing loans. To avoid loan losses, most SACCO's opt for credit reminders as part of credit monitoring-process. The study established that internal auditors and middle/lower level employees were mostly involved in the risk identification process and most SACCO's opt for guarantors, to mitigate themselves against any default risk.
In addition, conducting proper know your client (KYC) requirements and undertaking loan review analysis form an integral part of credit risk management. The study established that SACCO's are faced with the challenges of undercapitalization and loan pricing strategies. The former is attributable to lack of legislation on the minimum capital requirements of the SACCO's as compared to other financial institutions like the banks, with the sole objective of safeguarding the client's deposits. The latter is attributable to immense competition from other financiers who employee less stringent credit risk management practices resulting to a higher uptake of their loan products. Loan recovery is still a challenge to the majority of the SACCO's | en_US |
