The effect of credit rating policies on the loan uptake in savings and credit co-operatives (SACCOS) in Nairobi county
Abstract
SACCOs that have adopted effective rating policies have realized significant increases in the
loan uptake, reduction in loan default and efficient delivery of timely information to their
members and increased total lending. The objective of this study was to establish the effect of
credit rating policies on loan uptake in SACCOs in Nairobi County. This was an explanatory
study where the research sought to establish a relationship between the use of credit rating
policies and the loan uptake in the SACCOs in Nairobi County. A census survey was conducted
involving 30 SACCOs within Nairobi County registered and licensed under the Co-operatives
Act of 1997. This study used primary data that was collected from the respondents of the survey.
Data was captured and analyzed using Statistical Package for the Social Sciences (SPSS) version
20. Regression analysis was used to determine the relationship between rating policies and the
loan uptake. The study concludes that there is a relationship between rating policies adopted by
each Sacco in Nairobi County. The benefits gained from the use of effective credit rating policies
include accuracy in the decision making process. This accuracy leads to better assessments and
effective use of reliable data thus reducing judgment based on humanitarian and behavioral
factors thus providing better decision making. The study recommends that SACCOs should
effectively create systems that gather, correlate data concerning their membership and factually
assess their membership applications without prejudice. This in turn improves the credit scoring
of individual members. The SACCOs are also encouraged to regularly review their lending
policies so that member’s funds are not exposed to fraudulent activities