CREDIT MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN MARSABIT COUNTY, KENYA
CREDIT MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN MARSABIT COUNTY, KENYA
Diba Elle Ali - Department of Accounting and Finance, Kenyatta University, Kenya
Fredrick W S Ndede (PhD) - Department of Accounting and Finance, Kenyatta University, Kenya
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.
