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Department of Accounting and Finance

Kenyatta University



Department of Accounting and Finance

Kenyatta University

CITATION: Irungu., A.W & Ngugi, J. K. (2015). Contribution of savings and credit co-operative society (Saccos) management to loan default risk in Murang’a County. International Journal of Finance and Accounting 4 (5), 18-80.


The establishment of SACCO societies is motivated by desire to grant low and middle income class employees an opportunity to save and borrow at more favourable terms than commercial banks. However, many SACCOS in Kenya have sustained substantial losses due to loan default risk. Therefore, the general objective of this study was to examine contributions of SACCOS‟ management on loan default within Murang‟a County. The study was guided by the following specific objectives which include; to identify the types of loans offered by SACCOS in Murang‟a county, to determine the rate and repayment trends of loans by borrowers from SACCOS in Murang‟a county, to examine the influence of management on the loan uptake rates and repayment trends, to determine the contribution of age of management to loan default risk, and to determine the influence of education level of management to the rise of loan default risk. The study adopted a descriptive survey method because it is efficient in collecting large amounts of data within a short stipulated time. The target population comprised of a total 15 SACCOS picked using simple random sampling technique out of the 46 registered SACCOS in Murang‟a County. Data was collected by use of structured questionnaire. A regression model was used to analyze the objectives and a moderated multiple regressions were used to test the effect of different independent variables to the dependent variable. Data was analyzed by use of frequency tables, bar graphs and charts. Information obtained from this study was of importance especially to the management to enable it formulate policies which will help in reducing loan default risks. The study established that demographics (age) of the management staff was critical for the success of any financial institution. More so, the study revealed education level and training of staff had a positive influence on loan default risk among SACCOS of Murang‟a County. More over the study revealed that availability of sufficient capital base had a positive influence on loan default risks in Murang‟a County and that effective management of loan portfolio and credit function is fundamental to safety and soundness of the SACCOS. The SACCOS management staff needs to keep on training on credit management; this will equip them with skills necessary to efficiently and effectively control credit services consequently improving customer relations and minimize bad debts. SACCOS should consider risk management as a critical determinant of their portfolio performance. The SACCOS should apply proper financing mix in their capital structure, there should, therefore be optimum mix between share capital, institutional capital, savings and debt capital since any improper mix does not contribute significantly to the growth of SACCO‟s wealth (GSW) or reduction of bad debts.


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