Effect Of Credit Risk Management On The Financial Performance Of Housing Cooperative Societies In Kenya A Case Study Of Nairobi

Abstract

According to an essay in the UK, Small and Medium Enterprises in Kenya Economic Essays, the Small & Medium Enterprises (SMEs) are considered to play an integral part in a Country’s economy especially in the Third World Countries where poverty is prevalent. It is for this importance and contribution of the SMEs to achieve macroeconomic goals of the country that has attracted the attention of scholars in the field of study (Shelley, 2006). However, there are challenges facing the growth and future sustainability of the SMEs including poor management and financial constraints (Banerjee, 2014). It is for this financial challenges that has led to a massive sprung up of the Savings and Credit Cooperatives (SACCOs) as an alternative source of financing to the SMEs which could not get the same financial services from the Commercial Banks. Sacco have been both deposit taking and loan disbursement machinery to the SMEs and other individuals that are interested. Although Sacco may have eliminated the financial challenges faced by business owners through provision of loans for business expansion or asset financing, the other challenges such as poor management of the SMEs still remains. Poor management led to closure of so many businesses which consequently has a negative impact on the Sacco where the business owner has acquired a loan. The default rate of loan repayment then becomes another problem of the Sacco. It is for this reason that this study focused on the debt management of Saccos and how they affect their financial performances. This research study therefore concentrated on the effects of credit policy management on the financial performance of Housing Cooperatives in Kenya.