EFFECT OF DIVERSIFICATION ON LOAN DEFAULT RATE IN NON DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES, KAKAMEGA COUNTY KENYA
Abstract
The objective of the study was to determine the effect of diversification on the loan default rate of non-deposit taking savings and credit cooperative societies in Kakamega County. The study adopted descriptive survey design. The study targeted 255 respondents from 46 non-deposit taking SACCOs in Kakamega County. The study sampled 144 respondents using stratified random sampling techniques. Primary data was collected using structured questionnaire. Validity was achieved through expert opinions of the supervisors while reliability was achieved through Cronbach alpha. Quantitative data was analyzed descriptively using frequencies, Mean, Standard deviation and percentage while Pearson’s Product Moment Correlation Coefficient and Multiple linear regression analysis with aid of SPSS version 23 to generate inferential statistics. The data was presented in form of tables and regression models. The study established that diversification has a negative influence on loan default rate. The study concluded that diversification influence loan default rate of non-deposit taking savings and credit cooperative societies in Kakamega County. The study therefore recommended that SACCOS continue to diversify their lending activities and allocate more funds to the productive sectors of the economy. This is because a well-diversified portfolio has a tendency of reducing risk associated with lending.
Key Words: Diversification, Loan Default, SACCOs
CITATION: Mutire, C. J., Kadima, J., & Juma, D. (2020). Effect of diversification on loan default rate in non-deposit taking Savings and Credit Cooperative Societies, Kakamega County Kenya. The Strategic Journal of Business & Change Management, 7(3), 867 – 879.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i3.1713
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