The relationship between credit risk management practices and financial performance of Saccos in Kenya
Risk management practices can help Credit unions reduce their exposure to credit risks and enhance their ability to compete with other well established financial institutions like commercial banks in the market. It is importance to a study on effects of credit risk management practices to be established due to the role of enhancing shareholder value and improve its financial performance. This study sought to establish the relationship between credit risk main objectives of the study was to establish the relationship between credit risk management practices and financial performance of SACCOs in Kenya. The sample size of the study was 41 SACCOs. Questionnaires were used to obtain important information about the population. After receiving questions from the respondents, the responses were edited, classified, coded and tabulated to analyze quantitative data using Statistical Package for Social Science (SPSS version 17). Tables and charts were used for further representation for easy understanding and analyzes. The collected data was thoroughly examined and checked for completeness and comprehensibility. The data was then be summarized, coded and tabulated. Inferential statistic was used to establish the relationship between credit risk management practices and the financial performance of SACCOs. From the findings the study concludes that SACCOs adopted credit risk management practices to counter credit risks they are exposed to. The study also concluded that SACCO adopt various approaches in screening and analyzing risk before awarding credit to clients to minimize on loan loss. This included establishing capacity/competition and conditions and use of collateral/security and character of borrower were used in screening and risk analysis in attempt to reduce manages credit risks.The study further concludes that there was a positive relationship between credit risk management practices and the financial performance of SACCOs.