Impact Of Credit Risk Management On Financial Performance Of Savings And Credit Co-Operative Societies In Kitui County

ABSTRACT

The financial sector in any country is an important sector in the development of a

country. Most failures in the financial sector have been caused by non-performing loans

or bad debts which are attributed by poor or ineffective loaning policy. While the

consequences of credit risk management are well understood, the direction of the effects

are predicted by theory, and evidence on their magnitude are still scarce, and centered

around banking sectors and insurance markets. This study focused on the credit risk

management on financial performance in savings and co-operative societies in Kitui

County. This study was undertaken in Kitui County, Kenya where the researcher based

the research on financial performance and in specific Savings and Credit Co-operative

societies (SACCOs). The research design used in this study was a descriptive research

design. The data collection instruments in this case included self-administered

questionnaires which were used to extract valuable primary data from the SACCOs’

management. The study used quantitative method to analyze the data and examine the

simultaneous impact of the independent variables on the dependent variable. The findings

of the study are; there was a very strong positive relationship between credit monitoring

and financial performance of SACCOs, there is a very strong positive relationship

between loan policy in mitigation of risk and financial performance of SACCOs, there is

a very strong positive relationship between loan defaulters and financial performance of

SACCOs. The recommendations of this study are; the SACCOs should intensify, internal

auditor doing verification of the loans so as to improve on the monitoring of loans, the

SACCOs should continually review their loan policies so as to be up to data with the

current economic trends, the SACCOs should consider not give loans without considering

the retirement age.