INFLUENCE OF LENDING POLICY ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVES IN KAKAMEGA COUNTY, KENYA

Abstract

Sacco sector in Kenya had been described as a ticking bomb due to deteriorating liquidity and solvency levels. Moreover, the government had been on record enacting legislation in a bid to save Saccos which were already bleeding with non-performing loans. Government had also introduced new standards of accounting and stringent new regulatory requirement, none of which majority of Saccos were ready to adhere. Experts observed that Sacco's sector was fragile to shocks and kept procrastinating over a decade. Crucially, a court battle between government and Saccos was brewing as the later sought an injunction to block a bill on the floor of parliament that sought to raise taxes on Sacco deposits. Though effort by all stakeholders to save troubled Sacco sector was commendable, the dynamism of SACCO sector and desperate constant effort to revamp it had put to question and left most stakeholders in a dilemma. This study sought to asses on whether lending policy had influence on the financial performance of Saccos in Kakamega County. The study targeted 143 high ranking personnel from the 13 registered SACCOs found Kakamega County. Through stratified sampling technique, 105 respondents were selected. A questionnaire tool was adopted as the main research instrument. A pilot study was conducted among 20 senior management staff of SACCOs in Vihiga County, Kenya, to check data analysis. Descriptive and inferential statistics showed that; from the values of unstandardized regression coefficients with standard errors in parenthesis, the independent variable (loan lending policy) was significant predictors of SACCO performance. It was concluded that lending policy have significant association with the performance of SACOOs in Kakamega County. Accordingly, there was need to craft feasible lending policies to help them attract many customers and improve their total loan ratios which would translate in SACCO's financial growth. The study recommended that SACCOs should craft a credible and substantive loan lending policy. The policy should stipulate loaning guidelines meant to attract more customers while at the same time checking risky borrowers.

Key Words: Lending policy, SACCOs, Kakamega County

CITATION: Angweye, E. I., & Otinga, H. N. (2019). Influence of lending policy on financial performance of savings and credit cooperatives in Kakamega County, Kenya. The Strategic Journal of Business & Change Management, 6 (2), 1556 –1566.