Effects of Credit appraisal practices and credit monitoring on Profitability of Deposit Taking Sacco’s In Nairobi County
Keywords:
credit appraisal, credit monitoring, profitabilityAbstract
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 establish the effect of credit appraisal practices on the profitability of deposit taking SACCO's in Nairobi and to determine the effect of credit monitoring 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 credit appraisal practices, credit monitoring had a positive and significant effect on the financial profitability of SACCOs in Nairobi. Based on the findings above the study concluded that credit appraisal practices and credit monitoring have a positive effect on the financial profitability of the SACCOs. The study recommended that management of SACCOs should adopt effective credit appraisal practices and credit monitoring practices to enhance effective and efficient performance.
Keywords: credit appraisal, credit monitoring, profitability
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