Effect of Credit Information Sharing on Loan Performance Among Savings and Credit Cooperative Societies in Nairobi

Abstract

This study was set out to establish the effects of credit information sharing on the loan performance among SACCOs in Nairobi County. It sought to determine the effects credit information sharing have in relation to loan performance among SACCOs since the adoption of the concept in Kenya in the year 2013.Theoretical models predict that information sharing reduces moral hazard and adverse selection in financial institutions. The study adopted descriptive research design where data on loan performance was retrieved from the balance sheets and notes of 42 SACCOs during 2013-2015.Data on credit reports was obtained from CRB. Multiple regressions was applied to assess the effect of credit information sharing on loan performance among SACCOs in Nairobi County. The findings of the study show that there was negative relationship between number of credit reports accessed from CRB and default rate. There was a negative relationship between loan credit reports forwarded from CRBs and default. The findings shows Sacco were using the information provided by CRBs to analyze the borrowers past credit history. The study concluded that. Credit Information Sharing, increases transparency among SACCOs, helps them lend prudently, lowers the risk level to the SACCOs, acts as a borrowers discipline against defaulting and it also reduces the borrowing cost.