CREDIT MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SACCOS IN NAIROBI CITY COUNTY, KENYA
Abstract
The current study sought to find out the influence of credit management practices on the financial performance of deposit-taking Saccos in Nairobi County, Kenya. Specifically, the study aimed to establish the influence of loan repayment period, collection effort, collateral security, and credit appraisal process on financial performance. The study reviewed Asymmetry Information Theory (AIT), Modern Portfolio Theory (MPT), and agency theory to try and explain the relationship between credit management practices and financial performance. This study employed a descriptive survey design. The study targeted 214 credit managers and credit officers of the fifty-nine deposit-taking Saccos in Nairobi County-Kenya. Stratified random sampling technique was used to sample 139 respondents. The study used a structured questionnaire to collect primary data. Prior to carrying out the actual study, the researcher conducted a pilot test on five Saccos in Nakuru County to establish validity and reliability using content validity and Cronbach's alpha, respectively. The study used descriptive statistics and multiple regression. The research instrument was reliable, as indicated by Cronbach Alpha values greater than 0.7. Data were analyzed using both descriptive and inferential analysis with the aid of SPSS version 26. The results revealed that the four credit management practices influenced financial performance of deposit taking saccos in Nairobi City County, Kenya. The study concluded that loan repayment period, collection effort collateral security and credit appraisal process significantly influence financial performance of Deposit Taking Saccos in Nairobi City County, Kenya. Therefore, the study recommended that SACCOs should refine their loan repayment policies by adopting flexible repayment terms that accommodate borrowers' financial capabilities while maintaining strict risk assessment frameworks. SACCOs should strengthen their loan collection efforts by adopting proactive collection strategies such as personalized reminders, flexible penalties, and targeted staff incentives.
Key Words: Loan Repayment, Collection Effort, Loan Collateral Security, Credit Appraisal
CITATION: Onsongo, L. M., Miroga, J., & Otinga, H. (2025). Credit management practices and financial performance of deposit taking SACCOs in Nairobi City County, Kenya. The Strategic Journal of Business & Change Management, 12 (2), 117 – 140. http://dx.doi.org/10.61426/sjbcm.v12i1.3204
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DOI: http://dx.doi.org/10.61426/sjbcm.v12i2.3204
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