Loan Repayment and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in Embu County, Kenya
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Meagre earnings by SACCO’S operating in Kenya has been attributed to challenges of embracing appropriate loan repayment strategies. Though limited studies have been conducted in Kenya to establish the link between loan repayment and financial performance, it is observed that there is no clear understanding on the link between loan repayment and financial performance of SACCO’S operating in Embu County, Kenya thus formed the basis of the study. The study sought to investigate loan repayment and financial performance of SACCO’S in Embu County, Kenya. The specific objectives included; loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics on performance of SACCO’S in Embu County, Kenya. The study employed descriptive research design and targeted a total population of 250 respondents selected from of 10 SACCO’S operating in Embu County, Kenya. Out of the 250 respondents, Slovin’s formula was adopted to select 158 respondents to be the sample size of the study. The study used primary and secondary data. Primary data was collected using questionnaires through drop and pick later method. Secondary data was gathered by a review of existing materials that included financial statements and related empirical studies. The content validity was determined by lecturers that were drawn from department of Accounting and Finance of Kenyatta University and industry experts who were draws from SACCO’s. Reliability of the study was tested using Cronbach Alpha method and values of all the four variables of the study were more than the cut-off point of 0.7 thus were reliable for the study. Statistical Packages for Social Sciences (SPSS) version 24 was applied to analyse quantitative data using descriptive statistics such as mean scores, percentages and standard deviation. Multiple regression was conducted at 95% confidence level and 5% significance level to establish the statistical significance between variables of the study. The findings of the study were presented using tables and graphs. Data analysed revealed that there exist a statistical significant relationship between independent variables (loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics) and dependent variable (financial performance of deposit-taking Savings and Credit Co-operative Societies in Embu County, Kenya). The study concludes that unless SACCO’s embrace models of minimizing financial risks such as loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics models, achieving financial performance will be an uphill task. The study recommends that SACCO’s not only need to focus on non-performing loans but also seek to understand and review loan policies to encourage repayment within the stipulated timeframe.