Abstract
The main source of income for Savings and Credit Co-operative Societies in Kenya is from interest received from issue of loans to its members. However the issuance of loans has been faced with a lot of challenges as a result of default on repayment of principal loan and interest when they fall due. In the event that this trend is not checked it could lead to collapse of Savings and Credit Co-operative Societies movement and hence have a negative impact on the financial sector. The main objective of the study was to determine the effect of loan portfolio characteristics on the level of Non-Performing Loans for Savings and Credit Co-operative Societies in Kirinyaga County. The study was conducted on Deposit Taking Savings and Credit Co-operative Societies in Kirinyaga County, Kenya. The researcher used both descriptive and causal research design. The Deposit Taking Savings and Credit Co-operative Societies registered by Savings and Credit Co-operative Societies Regulatory Authority for the period 2011-2014 in Kirinyaga County were six and hence a census was conducted. The researcher used secondary data which was obtained from published Savings and Credit Co-operative Societies Annual Financial Statements and Reports and from Savings and Credit Co-operative Societies Supervision Annual Reports for the period 2011-2014 with data collection checklist being used as the instrument for data collection of the models. The findings of the study would be helpful to current and potential investors, regulatory bodies and would add important information to the existing body of literature. The study recommended that Savings and Credit Co-operative Societies should diversify their loan portfolio by advancing loan of different products, consider adjusting loans repayment period appropriately, should not concentrate much on making decisions on interest rates adjustment, ensure that the ratio of Loan to Shareholder equity is high so that they can have a strong asset base thus win public confidence and should consider advancing loans of different amounts since borrowers vary in their credit worthiness.
Highlights
Loan portfolio size depends on the size and capacity of the borrowers which is influenced by their economic status in that particular location [26] asserted that loan portfolio management is the process by which risks that are inherent in the credit process are managed and controlled
The study established that Loan Portfolio Diversification has a significant effect on the level of Non-Performing Loan (NPL) for SACCOs
SACCOs with high level of loan products are likely to reduce the level of NPLs
Summary
Loans for Savings and Credit Co-operative Societies in Kirinyaga County Kenya [9] A Loan portfolio is the total of all loans held by a bank, or finance company on any given day. In this regard, different loan products in SACCOs form a loan portfolio. SACCOs reduce the loan portfolio default risk by considering the credits repayment history of both individuals and groups applying for loans. This strategy might be applied by other financial institutions to screen qualified clients applying for loans.
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