Determinants of SACCOOs Credit Accessibility in Kenya; A Survey of SACCOOs in Imenti North Sub County

Abstract

The objective of SACCO’s is members’ empowerment through savings mobilization, disbursement of credit and ensuring long-term sustainability through prudent financial practices. A national survey conducted by Central bank of Kenya on financial access revealed that access to SACCO’s credit accessibility has reduced despite the increase in credit demand. This continuous decline in access to credit shows that SACCO’s members are not able to access the credit from their SACCO’s and they seek for credit from other financial institutions. The specific objectives that guided the study were to determine whether products range is a determinant of credit accessibility, to establish if collateral requirement is a determinant of credit accessibility, to determine if product characteristics is a determinant of credit accessibility and to establish if lending procedures is a determinant of credit accessibility in SACCO’s. The study adopted a descriptive research design which is concerned with describing the characteristics of a particular individual and census method was used. Data was collected through questionnaire. The test-retest method was conducted and correlation coefficient calculated using spearman's formula. The questionnaire was validated through a pilot with a sample of 10 respondents from SACCO’s in Nkubu town which is in Meru County. Descriptive statistics which includes mean and standard deviations were used to analyze data. The study also used logistic regression analysis to test the hypothesis and the p-value from test statistic was used to determine whether any differences could be attributed to the ordinary random factors or not. This was done using SPSS Version 22 where data collected was subjected to logistic regression. The study found that credit accessibility in Sacco’s is influenced by product range, collateral requirements, product characteristics and lending procedures. These findings were both supported by the frequencies of the responses from the respondents which were presented in the form of percentages and mean scores. On the credit accessibility parameters, product range and lending procedures had the highest positive influence on SACCO’s credit accessibility. The findings revealed that from 2011 to 2013, the number of loan applications received in SACCO’s from Imenti North Sub-County has dropped from significantly. This has affected the number of successful loan applications. The results of the analysis of the moderating variable revealed that government policies had a higher moderating influence on credit accessibility. The results also showed that the product range, collateral requirements, products characteristics and lending procedures can explain the changes in credit accessibility of SACCO’s in Imenti North Sub-County. The study recommends that SACCO’s should start investing in products innovation in order to ensure that they have a wide range of products which are tailor made to suit their client’s needs and develop a policy that allows members to use other forms of collateral at their disposal in order for them to qualify for higher loans that the ones guaranteed by their shares only. This will increase the number of members accessing credit and reduce the stiff competition that SACCO’s experience with the other credit service providers. SACCO’s should come up with ways of developing products that have features which will encourage their members to borrow loans. They should structure their repayment period to suit the ability of borrowers to pay. SACCO’s should simplify the lending procedures for members to be able to access credit. The lending procedure of having guarantors sign the borrower’s loan application form discourages members from accessing credit. SACCO’s should come up with the procedures other than limiting themselves to number of shares held and guarantors. Further study can be can be done in this area by increasing the scope of the study. Such scope would include other Sub- Counties in Kenya.