Effects of Debt Collection Practices and Credit Risk Governance on Profitability of Deposit Taking Sacco's In Nairobi County
Abstract
Prudential lending procedures in financial institutions involve identifying high-risk loan applicants, modifying lending conditions such as collateral requirements, loan duration and monitoring subsequent repayments. Credit risk management is an emerging phenomenon that lies within SACCO's. Many researchers have attempted to unravel the benefits of the credit risk management. However, it has remained unclear for the SACCO's management on the effects of sound credit risk management practices among deposit taking SACCO's. The General objective of this study was to analyze the effects of credit risk management practices on the profitability of deposit taking SACCO's in Nairobi County. Specifically, to investigate the effect of debt collection practices on the profitability of deposit taking SACCO's in Nairobi and to establish the effect of credit risk governance on the profitability of deposit taking SACCO's in Nairobi. This study was carried out through a descriptive research method. The target population of this study was 80 respondents directly linked to credit management drawn from the 40 deposit taking SACCO's, in Nairobi county. Simple random sampling technique was used. The questionnaire was used to obtain and gather information from the respondents. Responses in the questionnaires was tabulated, coded and processed by use of a computer Statistical Package for Social Science (SPSS v.21) programme to analyze the data. The regression results revealed that debt collection practices and credit risk governance Practices had a positive and significant effect on the financial profitability of SACCOs in Nairobi. Based on the findings above the study concluded that debt collection practices and credit risk governance practices have a positive effect on the financial profitability of the SACCOs. The study recommended that management of SACCOs should adopt debt collection practices and credit risk governance practices to enhance effective and efficient performance.
Keywords: debt collection practices, credit risk governance practices, profitability
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