Credit Risk Evaluation Systems and Non Performing Loans Among Sacco in Bomet County, Kenya

Abstract

SACCOs provide a safe haven for the savings of their members. The establishment of comprehensive credit facilities is however one of the fundamental functions of all savings and credit co-operative societies. Credit formation is the main income generating bustle for the SACCOs. The credit risk evaluation utility expedites efficient supervision and management of the SACCO loan portfolio in order to ensure impartial dissemination of funds and to inspire liquidity planning. The objective of the study was to analyze the effects of credit risk evaluation systems and non-performing loans among SACCOs in Bomet County. The research strategy used in this study was a descriptive research design. The instruments used to collect data for this case included self-administered questionnaires which extracted valuable primary data from the SACCOs’ management. This study used quantitative techniques to analyze the data and scrutinize the instantaneous impact of the independent variables on the dependent variable. Based on the findings the study concluded that credit risk evaluation systems have a constructive effect on the financial profitability of the SACCOs. The study revealed that administration of credit relationships that are centered upon all available client data and consistent all the way through the credit life cycle shall greatly reduce non-performance of loans and increase loan repayment.