CREDIT MANAGEMENT PRACTICES AND LOAN PORTFOLIO PERFORMANCE OF DEPOSIT TAKING SACCOS IN NAIROBI CITY COUNTY, KENYA
Abstract
The current study endeavored to find out the influence of credit management practices on loan portfolio performance of deposit taking Sacco’s in Nairobi County, Kenya. Specifically, the study attempted to establish the influence of loan repayment period, collection effort, collateral security and credit appraisal process on loan portfolio performance. The study reviewed Securitization theory, Asymmetry Information Theory (AIT), Modern Portfolio Theory (MPT) and agency theory to try and explain the relationship between credit management practices and loan portfolio performance. This study employed a descriptive survey design. The study targeted 167 credit managers and credit officers of the forty-six-deposit taking Sacco’s in Nairobi County-Kenya. Stratified random sampling technique was used to sample 118 respondents. The study used structured questionnaire to collect primary data. The study used descriptive statistics, which included the use of frequencies, means, and standard deviation. The research instrument was reliable as indicated by Cronbach Alpha values of greater than 0.7. Data was analyzed using both descriptive and inferential analysis with aid of SPSS version 26. The study concluded that credit risk management practices significantly influence loan portfolio performance among Deposit Taking Saccos in Nairobi. The study recommended that credit committees of deposit taking Sacco’s should always seek to review some policies such loan repayment period, legal procedure, and employee skill development in order to maximize profits. The study recommended that DTS should involve credit/field officers and customers in formulating viable credit terms and customized credit collection policies that positively attract customers as these will reduce loan delinquency, improve market share and consequently influence non-performing loans. DTSs should craft viable and customized collateral security measures meant to reduce loan delinquency ratios while at the same time ensuring DTS’s reputation and market share.
Key words: Repayment Period, Collection Effort, Collateral Security, Credit Appraisal Process
CITATION: Nabiba, M., & Miroga, J. (2024). Credit management practices and loan portfolio performance of deposit taking SACCOs in Nairobi City County, Kenya. The Strategic Journal of Business & Change Management, 11 (4), 776 – 797. http://dx.doi.Org/10.61426/Sjbcm.v11i4.3118
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i4.3118
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