| dc.description.abstract | Financial performance has received significant attention from scholars in the various
areas of business and economics. It has also been the primary concern of business
practitioners in all types of organizations since financial performance has implications
to organization’s health and ultimately its survival. High performance reflects
management effectiveness and efficiency in making use of company’s resources and
this in turn contributes to the country’s economy at large. Some of the factors
affecting financial performance include; nonperforming loans, size of the
organization, leverage and management efficiency.
The study made use of secondary data such as data on the levels of nonperforming
loans, profitability of the SACCOs and provision for bad debts which was obtained
from the annual financial statements of the SACCOs operating FOSAs within Nairobi
County. Journals, books and other resource materials on nonperforming loans and
financial performance were also used as well as review of related studies which was
done to compare relevant information as regards the same. The study made use of
regression analysis to establish the effect of nonperforming loans on the financial
performance of SACCOs in Nairobi County.
The study findings illustrates that there is a strong relationship between return on
assets and independent variables (firm size, leverage & nonperforming loans ratio).
From the determination coefficients, it can be denoted that there is a strong
relationship between dependent and independent variables given a coefficient of
determination value of 0.630.
From the findings and conclusions, the study recommends that SACCOs should opt
for equity financing instead of debt financing if it wants to improve on its leverage.
This involves funding growth through retained earnings and issuing of shares. The
study also recommends credit approval and monitoring procedures to be focused on
the borrower's cash flow and ability to repay in an effort to improve the quality of the
loan assets and mitigate future allowances for loan losses.Finally the study
recommends that since most of the SACCOs lack the efficient risk management
mechanism that will help eradicate or sieve out serial defaulters, they require
referencing solution that will enable them submit and share data whilst processing
their customers’ credit application. This will help prevent borrowers with
unsatisfactory credit record from accessing further credit from other unsuspecting
lending institutions. | en_US |
