Effects of Credit Risk Management Strategies on Performance Of Deposit Taking Saccos in Kiambu County
Abstract
SACCOs have contributed largely in achieving Vision 2030. This is by way of extending
loans and also providing direct or indirect employment to the society. However, in Kenya,
SACCOs are facing an impending crash. This has caused an unstable growth financial wise.
Credit risk management involves process, control, techniques and mechanism of mitigating
or minimizing impacts arising from loan defaults and thus use of credit risk management
strategies would aid in tackling the challenges facing deposit taking SACCOs. On the basis of
this backdrop that this research wanted to determine the effect of credit risk management
strategies on performance of deposit taking Saccos in Kiambu County. The theories
underpinning the research included knowledge based theory and information theory of credit.
The research utilized a design that is descriptive. This research’s target populace was 2
employees in the credit department for all the 55 Saccos. This yielded a total target
population of 110. Purposive sampling was employed since the researcher was targeting only
2 employees in the credit department. The study used primary data. Primary data on credit
management strategies and the non-financial aspect of performance was collected through
semi-structured questionnaires. Due to the COVID-19 pandemic, the questionnaires were
administered online via email through goggle forms. The analysis of the gathered data was
made possible by the use of Statistical Package for Social Sciences (SPSS) version 24. Both
descriptive and inferential statistics were generated. The descriptive statistics included
frequencies and percentages while the inferential statistics included a multiple linear
regression model. The study concludes that credit risk management strategies impacted the
performance of deposit taking Saccos in Kiambu County. The specific credit risk
management strategies are credit risk identification strategy, credit risk assessment strategy,
monitoring of credit risk strategy and risk of credit transfer strategy. The research also
concludes that adoption of these strategies has influenced performance positively.
Particularly, the performance of deposit taking Saccos in Kiambu County had increased in
terms of increased satisfaction of customer, increased profitability, increased market share,
increased customer base and efficiencies that are enhanced in delivery of services. According
to the results of the research the study made several recommendations. To start with, results
showed that several credit risk management strategies such as risk of credit strategy
identification, credit risk assessment strategy and credit risk monitoring strategy leveraged on
use of technology. Hence, the study recommends that deposit taking SACCOs should
consider budgeting for technology advancement. This will create for adoption of advanced
and better technologies which utilize complex data algorithms and data analytic techniques to
yield accurate credit worthiness rating of borrowers. This will thus enable the SACCOs to
evade risky borrowers who may dampen their performance by improving the non-performing
loans amounts.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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