EFFECT OF CREDIT RISK MANAGEMENT PRACTICES ON NON-PERFORMING LOAN IN DEPOSIT TAKING SACCOS IN UPPER EASTERN REGION KENYA

Njagi Dickson Muriungi, Dr. Kimani E. Maina

Abstract


The SACCO’s subsector remains a significant player in the provision of financial services to the Kenya household and small business segment. SACCOs have been making tremendous efforts to grow to a vibrant financial actor. Nevertheless, the challenge associated with nonperforming loans, which have remained relatively unchanged for the last few years, have continued to weigh them down. Generally, this study sought to examine effect of credit risk management practices on nonperforming loan in deposit-taking SACCOs in Upper Eastern Region Kenya. The specific objectives were to determine the effect of credit information sharing, collateralization, credit appraisal guidelines and loan monitoring on nonperforming loan in deposit taking SACCOs in Upper Eastern. The study adopted a descriptive survey research design. The target population was all deposit-taking SACCOs in Kenya with the accessible population being 22 deposit-taking SACCOs in Upper Eastern Region. The study adopted a census survey since the accessible population was small. Primary data was collected through questionnaires. Pilot test was conducted to assess validity and reliability of the research instrument. The data collected was analyzed using descriptive and inferential statistics. The results of the study were presented in figures and tables. Pearson correlation analysis was used in this study to determine the relationship between the dependent and the independent variable. The results indicated that credit information sharing, collateralization, credit appraisal guidelines and loan monitoring affected nonperforming loans in deposit-taking SACCOs in Upper Eastern Region Kenya. The study recommended that the government enact regulations to facilitate credit information share among the SACCOs while the SACCOs should encourage their loan officers to issue more loans under collateral and the SACCOs formulate and adhere to loan appraisal guidelines and monitor the repayment of loans advanced to customers.                                                                                            

Keywords: Credit Information Sharing; Collateralization; Credit Appraisal; Loan Monitoring; Non-Performing Loan; Deposit Taking


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