Effect of Credit Management on the Loan Performance: Evidence from Saving and Credit Cooperative Organizations in an Emerging Market Economy.

Abstract

The study determined the effect of credit management practices; debt management, client appraisal and lending management on the loan performance of saving and credit cooperative organisations-SACCOs in Kenya. The study was anchored on the credit management theory. The study was a census of all the 180 deposits taking SACCOs in Kenya licensed by the Sacco Society Regulatory Authority-SASRA from 2016 to 2022. The study employed a causal research design, using panel data and analyzed using regression analysis. Results established that the credit management indicators employed in the study were fit to estimate loan performance in SACCOs. Debt management as an indicator of credit management had an insignificant effect on loan performance of SACCOs. Client’s appraisal has a significant inverse effect on loan performance in SACCOs. Finally lending management has an insignificant effect on SACCOs loan performance. The study recommends that firms should minimize long-term debts to equity, that governments address regulatory challenges in credit appraisals to allow a less conservative assessment of borrowers ' worthiness and that SACCOs should establish their net interest margins with little absolute caps as this hardly influences their loan performance. The study is expected to form the basis for policy, and theory formulation contribute to existing empirical literature in the field of finance and enhance loan performance and service delivery among SACCOs and other financial institutions.