Effect of Credit Policy on Financial Performance of Deposit Taking Savings and Credit Cooperative Organizations in Kenya

Abstract

The study sought to determine the effect of credit policy on financial performance of deposit taking Savings and Credit Cooperative Organizations in Kenya. Key determinants of SACCO financial performance reviewed in this study were credit collection, loan policy, credit monitoring and insider trading. The study methodology comprised of a descriptive research design and a target population of 175 SACCOs registered under SASRA. The study adopted all SACCOs in the study through a census method. Data collected was analyzed using descriptive and inferential statistics through multi-linear regression model. Model assumptions were tested for significance and although its correlation was weak. Secondly, credit collection had a positive and significant influence and a weak positive correlation. Furthermore, credit monitoring had a positive and significant influence its correlation was weak but positive. Finally, insider trading had a positive and significant effect on productivity. The study made recommendations to DT-SACCO managers to review their credit collection policies and adopt best practices through benchmarking from commercial banks. Furthermore, it is recommended that, DT-SACCO managers should enhance the adoption of Artificial Intelligence Technologies that can effectively analyze client credit scores to minimize the rise of non-performing loans and other financial losses that the DT-SACCOs may face in the future. Finally, the study made suggestions for further studies to be done to look at the remaining 53.9% factors affecting financial performance and another study to explain how differences in SACCO financial strength, management skills and compliance to financial regulations dictate the formulation and implementation of credit policies.