Analysis of Credit Terms and Loans Performance Among Deposit-Taking SACCOS in Nairobi City County, Kenya
DOI:
https://doi.org/10.70619/vol4iss1pp1-8Keywords:
Credit Terms, Loans Performance, Deposit-Taking SACCOsAbstract
Deposit-taking SACCOs in Kenya have consistently recorded an increasing rate of loans that are not honored as and when they become payable throughout the years. According to SASRA 2021 Sacco supervision report, the NPL in the DT-SACCOs was 5.23% in 2016, 6.14% in 2017, 6.30% in 2018, 6.15% in 2019, 8.39% in 2020, and 8.86% in the years 2021. This persistent increase in NPL among the DT-SACCOs is worrying, and the cause has not been established conclusively. This study sought to analyze how credit terms aspect of CMP affects loan performance in DT-SACCOs within the City County of Nairobi. A descriptive research approach was adopted in this research and the target population included 47 DT-SACCOS. A census approach was used and the 47 credit managers were the targeted responders. Descriptive and inferential statistics were employed to analyze the data collected. The findings revealed that credit terms had a negative and significant effect on loan performance. The study concluded that credit terms reduce loan performance among deposit-taking SACCOs. The research recommends that SACCO’s management should have well-stipulated credit terms that are understandable to the borrowers. The management should have flexible loan repayment periods to help them reduce the NPLs.
References
Atieno, R. (2001). Formal and informal institutions' lending policies and access to credit by small-scale enterprises in Kenya: An empirical assessment. AERC.
Auronen, L. (2003, May). Asymmetric information: theory and applications. In Seminar of Strategy and International Business as Helsinki University of Technology (Vol. 167, pp. 14-18).
Benson, O. N., Lucas, M., Margret, M., & Kelvin, L. N. (2016). The link between financial performance and loan repayment management in Tanzanian SACCOS. African Journal of Business Management, 10(4), 89-97.
Buro, I. A. (2019). Credit Risk Management and Performance of Loan Portfolios of Deposit Taking Savings and Credit Co-Operative Societies in Garissa County, Kenya. Journal of Financial Management of Property and Construction, 15(1), 71-94.
Chege, M. L. (2021). Credit Management Practices and Loan Default in Agricultural Finance Corporation, Kenya.
Ibrahim, D. M. (2010). Debt as venture capital. U. Ill. L. Rev., 1169.
Johnston, K. (2006). Kenya: The Gateway to Credit Union Development in Africa. Credit Union World, 8(2), 6-7.
Kamau, S. I. (2015). Effect of credit management practices on financial performance of savings and credit co-operative societies in the Hospitality Industry in Nairobi (Doctoral dissertation, University of Nairobi).
Mpofu, T. R., & Nikolaidou, E. (2018). Determinants of credit risk in the banking system in Sub-Saharan Africa. Review of development finance, 8(2), 141-153.
Muthama, K. M., & Warui, F. (2021). Influence of lending terms on loan performance of microfinance institutions in Kisii County (Case Study; Kenya Women Microfinance Bank). International Academic Journal of Economics and Finance, 3 (7), 21, 44, 2.
Muturi, E (2016) Effect of Credit Management Practices on Loan Performance in Deposit Taking Microfinance Banks in Kenya. International Journal of Innovations, Business and Management (IJIBM).10, (1)
Ndegwa, M. W., & Koori, J. (2019). Financial inclusion and performance of deposit-taking savings and credit co-operative societies in Meru County, Kenya. International Academic Journal of Economics and Finance, 3(4), 286-307.
Ntoiti, R., & Jagongo, A. (2021). Non-Performing Loans And Financial Stability Of Deposit-Taking Saccos Regulated By SASRA. International Journal of Finance and Accounting, 6(2), 29-39.
Osendo, D. A. (2019). Loan Repayment Terms And Performance Of Youth Enterprise Development Fund In Kisumu Central Sub-County, Kenya (Doctoral dissertation, University of Nairobi).
Ozili, P. K. (2015). How bank managers anticipate non-performing loans. Evidence from Europe, US, Asia, and Africa. Evidence from Europe, US, Asia and Africa, 73-80.
Silikhe, S. (2008). Credit risk management in Microfinance Institutions in Kenya [Unpublished MBA Project].
Susan, N. P. (2012). Credit terms, access to finance, and Financial Performance of SMEs in Kampala. Accounting and finance of Makerere University.
The SACCO societies' regulatory authority (2020). SACCO supervision Annual Report, SASRA
The SACCO societies' regulatory authority (2021). SACCO supervision Annual Report, SASRA
Uzoh, C. A. (2012). The impact of credit management on the profitability of a manufacturing firm: A Case study of Unilever Plc Aba, Nigeria [Unpublished M. Sc. Thesis, Department of Accounting, University of Nigeria, Enugu, Nigeria, 16].
Wilberforce, B., Robert, M., & Atwiine, D. W. (2021). The Effects of Credit Terms on Loan Perform
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Jared Okumu Nyabwari , Caroline Kimutai
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
