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.