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Rebecca Jerotich Kipchumba

Jomo Kenyatta University of Agriculture and Technology

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Dr. Joshua Wepukhulu Matanda

Jomo Kenyatta University of Agriculture and Technology

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CITATION: Kipchumba, R., J. & Matanda, J., W. (2016). Effect of 5 Cs Credit Appraisal Model On Non-Performing Loans Of Saccos In Kenya: A Case Of Kenya Wildlife Sacco. International Journal of Economics and Finance. Vol. 5(10) pp 67-77.





Sacco’s in Kenya experience a high level of non-performing loans. This trend threatens viability and sustainability of Sacco’s and hinders the achievement of their goals. As with any financial institutions, the biggest risk in Sacco’s is lending money and not getting it back. This study aimed at establishing the effect of character as credit appraisal model on Non-Performing loans in Sacco’s with specific reference to Kenya wildlife Sacco (Kewisco). The specific objectives of the study was; to examine the effect of the borrowers’ character on the level of NPA. The researcher used a case study because it allowed an in-depth investigation to the subject of study. Comparison of variables was done quantitatively using Pearson product moment correlation and multiple regression to measure the strength between the independent variables (Capital) against the dependent variable Non-performing loans, which was done using asset quality ratios. The response rate was 78.95% and this was sufficient to make conclusions upon. The study therefore established that mean indexes were as follows; for borrowers character was 4.06 meaning it fell within the agree zone and for non-performing loans was 3.52. This implies that character had strong influence on non-performing loans. The overall model indicated that Character was highly significant at p=0.032. The fitted model was: Y= 6.981 +0.045X1. The correlation coefficients r indicate that Character was found to have a statistically significant strong positive correlation with non-performing loans (r=0.365, p-value = 0.000). The relationship was found to be statistically significant at 36.5% significance level (p-value = 0.00). The study therefore did establish that out of the character as an independent variables; character was a key factor that influences the non-performing of loans at KWS Sacco. This study therefore recommends as follows: KWS Sacco needs to urgently address the issue of character and come up with policy to safeguard itself against serial borrowers and defaulters, maximize the use of credit reference bureaus and implement to the letter its code of conduct and credit policy. The researcher therefore would wish to suggest that future studies be conducted to establish the critical factors that influence non- performance eon loans from a Sacco point of view

Key words: Character, Non-performing loans, Credit, Credit appraisal, Sacco


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