Credit Management Practices and Financial Performance of Deposit Taking Savings and Credit Co-Operative Societies in Marsabit County, Kenya
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Date
2024-11
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International Academic Journal of Economics and Finance
Abstract
Through the maintenance of credit risk
exposure within reasonable bounds, credit
management practices aim to optimize a
SACCO's risk-adjusted rate of return. The
level of professionalism, governance, policies
and processes, and risk management that is in
place, significantly impact credit management
success. This topic has gained attention
because DT-SACCOs in Marsabit County,
Kenya have historically shown declining
trends. These trends have frequently resulted
in the eleven SACCOs failed as a result of
noncompliance with SASRA's capital base
threshold and a lack of competitive
management abilities, poor credit
management that prevents loans from being
recovered, weak internal control systems that
allow management to misappropriate funds,
and infrequent audits. The study aimed to
explore the effect of credit management
practices on financial performance of savings
and credit co-operative societies in Marsabit
County, Kenya. Specifically, the investigation
intends to determine the effect of internal
control system and Audit, management
competency and capital adequacy influence
Sacco financial performance in Marsabit
County, Kenya. The study was guided by
Resource Based View Theory, Agency
Theory and Financial Intermediation Theory.
The study adopted descriptive research
design. Random sampling technique was
utilized. The study utilized primary and
secondary data. The research used
questionnaire and published article/financial
reports to obtain data respectively. The
sample size was selected using a stratified
random sampling procedure. To produce the
analysed data, SPSS version (23) was utilized.
Analysis results were displayed in tables and
charts, with interpretations provided in
accordance with the objectives of the project
and a generalization of the results. The study
upheld high ethical standards by securing a
survey license from the NACOSTI and
guaranteeing the participant’s confidentiality
and anonymity. The findings revealed that
correlation coefficient (R) in this model is
0.817, indicating a strong positive
relationship between the predictors (internal
control systems and audit, management
competency, and capital adequacy) and the
financial performance of DT-SACCOs.
Further, the findings established that
significance level (p-value) associated with
the F-statistic is 0.003, which is well below
the commonly accepted threshold of 0.05
which indicate that there is positive relation
between credit management practices and
financial performance of DT-SACCOs. The
research concludes that there is a strong
correlation between the effectiveness of
internal controls and audits and the overall
financial performance of DT-SACCOs. The
managers of the SACCOs should implement
regulations that promote the establishment of
robust internal control systems and audit
mechanisms within SACCOs. Clear
guidelines should be provided to ensure that
SACCOs maintain adequate controls to
manage credit risks effectively. The managers
of SACCOs must prioritize investing in
continuous training and capacity building
programs to enhance their management
competency in credit risk assessment,
monitoring, and recovery
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Citation
li, D. E., Ndede, F. W. S. (2024). Credit management practices and financial performance of deposit taking savings and credit co-operative societies in Marsabit County, Kenya. International Academic Journal of Economics and Finance, 4(3), 410-446