Credit Risk Management and Financial Performance of Deposit Taking Savings and Credit Co-Operative Societies in Nairobi City County, Kenya

Abstract

The study sought to determine the relationship between credit risk management and financial performance of deposit taking SACCOs in Nairobi City County. There is substantial empirical evidence focusing on the relationship between SACCOs and their financial performance but few studies if any, have specifically focused on deposit taking SACCOs. In this regard, there is need to fill the research gap that exists as well as add to the few empirical studies that exist. Most of the empirical studies have found a negative relationship and this warranted further consideration hence, need for the current study. The research design used was descriptive in nature with data being collected from 40 deposit taking SACCOs. Questionnaires were administered to 120 respondents three from each deposit taking SACCO in Nairobi City County through purposive sampling. Data was analyzed using standard deviation analysis, multiple regression and correlation coefficient. The study found that credit monitoring has a significant effect on financial performance of deposit taking SACCOs (p-value=0.0146). Similarly, the study established that credit appraisal has a significant effect on financial performance (p-value=0.0229) whereas credit risk control was found to have a significant effect on financial performance (p-value=0.0211). Hence, the study concludes that credit risk management is a key factor in explaining the financial performance of deposit taking SACCOs in Nairobi City County, Kenya.