The Effect of Credit Policy on the Financial Performance of Deposit Taking Saccos in Kenya

Abstract

The main purpose of the study was to investigate the effect of Credit policies on the financial performance of deposit taking Saccos in Kenya. The study is significant to the management and members of the deposit taking Saccos and also the government as it will be able to sensitize the Saccos on the impact of the Regulatory Authority policies to their financial performance and facilitates them to develop and implement effective strategies to comply with the regulatory authority policies.It also provides a background to researchers who may want to carry out further research. The researcher used a census approach for the six deposit taking Sacco in Kenya to get the data required. The main way of getting information was through secondary data from the central bank of Kenya and the individual institutions. The findings indicated a positive significant relationship (r=0.199) implying that regulatory authority policies affects the financial performance of deposit taking Saccos with a minimal effect since there are other more factors that affect financial performance with a greater effect. The result of the regression analysis indicate that the dependent variables are both individually and jointly significant and have an effect on financial performance. From the values of the coefficients we discern that the independent variables are correlated to the dependent variable.The results indicated that credit standard policy significantly affects financial performance. (β=47.9, pvalue=0.48), credit terms by (β=-86.5, p-value=0.123) and collection effort by (β=-129.5, p-value=0.383). In conclusion, the study established that the three independent variables significantly affect financial performance. From the study, it is recommended that deposit taking Saccos organizations should not concentrate so much on the regulatory authority policies but also other factors since even though the policies affect deposit taking Sacco’s financial performance.