Determinants Of Loan Funds’ Performance Of In Laikipia County, Kenya

Abstract

In this study, the performance of loan funds within Laikipia County, Kenya is investigated with particular attention given to the Laikipia County Enterprise Fund (LCEF) and the Laikipia County Revolving Cooperative Fund (LCRCF). The determinants of these fund's efficiency from a beneficiary perspective - in particular Small and Medium-sized Enterprises (SMEs) and cooperatives - are analyzed. This study sought to investigate these impediments focusing on both the supply and demand side. Three primary areas were evaluated: beneficiary traits, loan fund administration methods, and loan operation procedures processes. On the supply, Loan repayment rate, loan portfolio quality, loan fund sustainability and loan fund growth are used as indicators to operationalize the performance of the loan funds. The research seeks to understand the effect of beneficiary characteristics on loan fund performance. This quantitative research project involved the development a questionnaire to gather data from fund management and administration, Laikipia County SMEs. Descriptive statistics, correlation analysis, and regression model was used to establish the most influential factors on loan fund performance. The questionnaire's reliability and ethical considerations related to data collection and analysis was also assessed provided evidence-based insights that can inform decisions, enhance management and drive targeted policy recommendations for Laikipia County's Enterprise Fund and Cooperative Revolving Fund. These funds are essential in providing financial assistance for SMEs and cooperatives, thereby stimulating economic growth and empowerment in the region. The study findings showed that beneficiary characteristics have significant influence on performance of loan funds in Laikipia County. Moreover, loan management practices positively and significantly influenced loan funds performance. Likewise, loan operation procedures significantly affected performance of loan funds. A conclusion was made that loan service provider at the county need to understand beneficiary demographic characteristics based on education, borrower’s experience and kind of business operated. In addition, loan management practices such as approvals, disbursements and default policies are integral in achieving optimal loan performance. The study concluded that loan operation procedures significantly and positively affected performance of loan funds. The study recommends that to review their vetting and screening process so that credit worth people are allocated financing through credit have credit worthiness attributes. The use of technology will make the loan management practices efficient and effective since many data can be pooled and worked within a shorter period of time. It is recommended that loan operation procedures are tailored to meet customer expectations especially on simplification of the processes. The study suggests use of secondary data in measuring performance of loans