Organisational Factors Influencing Implementation Of Lending Policy In Saving And Credit Co-Oporative 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 lending policy. This study focused on the organizational factors that affect implementation of lending policy in Saving and Credit Co-operative societies. The study was undertaken in Kitui County, Kenya where the researcher based the research findings registered Savings and Credit Co-operative societies (SACCOs). The researcher used descriptive research design and data collection instruments 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 effects of the independent variables on the dependent variable. The study found that the major management practices explained have great influence on the implementation of the lending policies included regularly reviewing of the lending policy compliance, the influence of different levels of approval, creating and maintaining credit file for each loan and setting limits on amounts that can be lent. The separation of ownership and limited span of control by managers were the major organizational structure factors having an influence on the implementation while the financial factors included earning, liquidity, institutional capital, core capital in total deposits and the management quality referred to be highly influential in the implementation of lending policies in the SACCOs. Therefore to make effective lending decisions, SACCO managements needs to align their organization structures which includes that management practices accepted and financial indicators according to best practices in the financial sector so as to ensure sustainable lending practices. SACCOs management should therefore be ready to invest in building capacity in terms of management effectiveness, financial literacy and improving their organization structures where it is required. The researcher also recommends for more regulatory guidelines concerning lending policy formation in SACCO institutions as is the case for the banking sector in order to enhance professional activities in lending