Effect of Credit Risk Management on the Financial Performance of Savings and Credit Cooperative Societies in Kenya

Abstract

The aim of this study was to analyze the effects of credit risk management on SACCOs' financial performance. The study's target population was the 239 Non-Deposit Taking (NDTS) SACCOs in Mombasa County that were taken to represent all NDTS SACCOs in Kenya.  The study adopted a survey design that is both descriptive and exploratory. Questionnaires were used to gather the primary while data collection forms were used to collect the secondary data. Both parametric (t-test) and non -parametric tests (Pearson correlation coefficient) and multiple regression were done to find the influence and the trend of the association amid credit risk management and SACCOs' financial performance. The correlation results for both primary and secondary data revealed that credit risk management had an influence on financial performance that was significant and positive. This means that credit risk management is vital and SACCOs need to be vigilant in their credit risk management as it is an area if neglected can cause a great loss to the SACCOs. The results of the hypothesis testing revealed that the null hypothesis was to be rejected. The researcher recommended that it is important for SACCOs to continue enhancing their credit risk management as it leads to improved financial performance. The research recommended that a replica of this study be done in other sectors. A similar one can also be done on SACCOs but instead of using structured questionnaire the study to use both structured and unstructured questionnaire in order to get more information from the respondents.