Credit Reference Bureaus Research Articles

EFFECTS OF CREDIT REFERENCE BUREAU PROCEDURES ON PERFORMANCE OF LOAN PORTFOLIO: A CASE OF SELECTED COMMERCIAL BANKS IN TANZANIA

This study investigates the impact of credit reference bureau (CRB) procedures on the performance of loan portfolios at selected commercial banks in Tanzania. A cross-sectional research design was adopted, with data collected through questionnaires and interviews involving 95 respondents from selected commercial banks. The findings show that the procedure to accessing loans had a positive and significant relationship with loan portfolio performance at these banks (β = 0.835, p = 0.000), as did loan approval procedures (β = 0.789, p = 0.001) and quality control procedures (β = 0.768; p = 0.002). All were significant at 5% level. The study concludes that using credit reference bureau services allows banks and other credit providers to assess potential clients, track their financial performance, and manage any accumulated debts. The study recommends that the government of Tanzania work closely with listed commercial banks and other financial institutions to ensure compliance with legal requirements specifically policies and procedures that assist in screening and monitoring clients from the initial stage of lending by using credit reference bureau procedures to improve decisions on loan provision.

The role of credit reports in digital lending: a case study from Mexico

Abstract Digital credit that uses non-traditional scoring techniques has already expanded credit access to many new populations. A point of policy debate is whether digital lenders should be fully integrated into information-sharing systems, such as those offered by credit reference bureaus (CRBs). We study an example of a digital lender in Mexico adopting credit bureau scores into its screening process. Using unique administrative data, we estimate a regression discontinuity in time around the lender’s integration of credit bureau scores. We find that the acquisition of credit scores reduces defaults, with the likelihood of borrowers’ repayment increasing by 10–13 per cent.

Credit Risk Analysis and Microfinance Loan Quality in Rwanda: A Case Study of Cooperative COPEDU Ltd

The key objective of Microfinance Institutions (MFIs), like any other business organization is to maximize profits. However, the increased rates of non-performing loans (NPLs) hinder microfinance institutions from achieving their main objective. This study aimed to examine the effect of credit risk analysis on the quality loan portfolio of Microfinance Institutions in Rwanda. The credit risk analysis was measured using collection policy, loan policy and client credit appraisal. On the other hand, the loan quality portfolio was measured by Non-performing Assets (NPAs). A descriptive research design was used to describe the relationship between the study variables. A total of 30 respondents consisting of managers and credit officers were purposively selected. Data was collected from primary and secondary sources using questionnaires and financial reports. Data was analyzed by using both descriptive and inferential statistics. The results from the survey indicated that all aspects of credit risk management have got an effect on the quality loan portfolio, as evidenced by an R-square of 34.8% and a P-value of 0.01. Findings further revealed that poorly formulated Credit policy and lack of monitoring of loans through inadequate loan appraisal and loan collection procedures were identified as the main causes of Non-Performing Loans (NPLs), at 43.3%; 66.7%; 53.3%, respectively, further evidenced by the P-values of 0.01,0.012 and 0.000. The researchers further found that management decisions, conditions, and procedures have the greatest effect on non-performing loans at M=4.30; SD .887; and M=4.23; SD= .679, respectively. To address the danger of non-performing loans in the MFIs, the following measures were recommended to the management of COPEDU LTD. Effective monitoring of loans, credit training programs, tight security requirements and seeking the services of credit reference bureau and committed debt collectors.

HUSTLERS’ FUND: A DISRUPTIVE MODEL IN THE FINANCIAL CONTEXT IN KENYA: REVIEW OF LITERATURE

Micro, small, and medium-sized enterprises are regarded as a crucial component of economic growth, therefore, they are acknowledged as essential generators of productivity, employment, and innovation. Although MSMEs have received a lot of attention recently, many of them fail to live long to celebrate their first birthday while others stagnate in growth. This could be attributed to many factors key among them lack of finances due to lack of collaterals and high interest rate. The Kenyan Government in December 2022 launched MSMEs fund commonly known as ‘Hustler fund’ which is a disruptive financial innovation model that is changing the financial and scape in in Kenya. However, scanty research has been done on the implication of financial innovation in Kenyan context. The purpose of this study was to investigate the effect of Hustler fund on the Kenyan financial sector. The study was grounded on the following theories: resource-based theory, constraint-induced financial theory, financial inclusion theory, and disruptive innovation theory. Exploratory research design was used and data was collected through literature analysis of the available documents. The study found out that hustler fund is a disruptive innovation model in the financial sector due to its low interest rate, lack of requirement of clearance from Credit reference bureau and absence of threats. Hence the other players in the financial sector in order to remain competitive and relevant they should develop strategies aimed at financial deepening by making loans affordable to most Kenyans and with improved ease of access.

Effect of Credit Information Bureau and Appraisal Methods on performance of Commercial Banks in Mwanza Region

This study intended to identify the effect of credit information bureau and appraisal methods on performance of commercial banks in Mwanza Region. Specifically, the study intended to assess the effect of Credit Reference Bureaus’ information sharing on the credit performance of commercial banks, to assess the effect of the credit scoring appraisal method employed on the performance of commercial banks and to assess the effect of non-performing loans on the performances of Commercial Banks in the Mwanza Region. The study was guided by three theories; the theory of asymmetric information, moral hazard theory and multiple - bank lending model. The study adopted a descriptive research design, sampling 105 respondents randomly and purposefully and collected data through questionnaires. The aim is to establish the effect of credit information bureau and appraisal credit scoring methods on the performance of commercial banks in the Mwanza Region. Results revealed that credit information bureau had a positive, strong effect on the credit performance of commercial banks, and this effect is significant in Mwanza region. Non-performing loans had a positive, weak effect on the credit performance of commercial bank and it was not significant. Finally the credit scoring appraisal approach has a negative, weak effect on commercial bank credit performance. The study concluded that credit information bureau has a significant influence on credit performance of commercial banks and therefore should be used to reduce non-performing loans. The study recommended that banks should continue to use the credit reference bureau’s information-sharing services as it enhances their profitability through the reduction of non-performing loans.

Shylocks or Legitimate Lenders? An Inquiry into the Regulation of Digital Lending in Kenya

The lending market in Kenya has seen a proliferation of digital lenders that are largely unregulated. The lenders provide seemingly cheap loans whose interest is huge when the Annual Percentage Rate (APR) is calculated. The lenders operate through apps that are uploaded to App Stores and pulled down at will. They require their customers to ‘accept’ terms and conditions before accessing the loans, and these terms sometimes allow the lenders unfettered access to customer data which they use and abuse in equal measure. The lenders use such customer data to threaten, to contact those on the contact lists of the customers’ phonebook, and to report them on Credit Reference Bureaus (CRBs). This paper seeks to examine the law on regulation of the digital lending environment in Kenya and to recommend the enactment of the Financial Markets Conduct Bill of 2018 which introduces elements of the Twin Peaks model of financial regulation. Key Words: Shylocks; digital lenders; data privacy; Annual Pricing Rate (APR); digital regulation; Twin-Peaks Model

Credit Reference Bureau Policy Effect on Loan Performance of Commercial Banks in Kenya

One of the major challenges facing banks all over the world is the increasing rate of non-performing loans. Government and the banks themselves have devised various mechanisms to reduce non-performing loans while increasing credit uptake in the credit market. However, the scenario happens to be opposite; as demand for credit increases, so are the non-performing loans. In Kenya, the government introduced Credit Reference Bureaus in 2009 in order to address this problem. However, the problems continue haunting the banks raising questions on whether credit information sharing is working or not. The purpose of this research project was to establish the effect of credit information sharing policyon loan performance of commercial banks in Kenya. The study employed mixed method research design involving secondary methods. The target population was the 42 commercial banks in Kenya and used 210 credit officers. Collection of data was through the questionnaires which were administered to the bank credit officers using drop and pick approach. Document analysis was used to obtain credit records of the banks. The findings shown that non-performing loans increased significantly even after implementation of the credit information sharing (CRB) policy, an implication that the main expected outcome was not achieved. Though there was a significant increase in profits after implementation of the CRBs, a close analysis of the trend shows that there was no major shift that could be attributed to the policy. Responses from the accounting officers also proved that through the CRB policy was well intended, the goals have not been met largely due to lack clarity on the criteria for listing and delisting defaulters. The study therefore recommends the commercial banks and the CRBs should make their policies on listing and delisting defaulters clear and easy to implement.

Effect of Interest Rate Regulation on the Relationship Between Loan Lending Policies and Financial Performance of Commercial Banks in Kenya

The first specific objective was to determine the relationship between credit risk management and financial performance of commercial banks in Kenya. The second specific objective was to determine the effect of interest rate regulation on the relationship between loan lending policies and financial performance of commercial banks in Kenya. The study used descriptive research design and the research philosophy used was positivism. The study adopted a census survey and purposive sampling method targeting 43 bank managers, 43 credit managers and 43 operations managers of the 43 commercial banks in Kenya for period 2013 to 2018. Document analysis guide was used to collect secondary quantitative data for period 2013 to 2018 from the commercial bank’s financial reports and questionnaires were used to collect primary data. The questionnaires which were administered to the respondents were structured. Content validity was used to determine the validity of the instruments. Data was analyzed using multiple linear regression method. The findings of the study revealed that loan lending policies; credit risk management measured by (non-performing loans and debt collection costs) have a significant and negative impact on ROA of commercial banks in Kenya. The study findings revealed that there exists a relationship between interest rate regulation, loan lending policies and financial performance of commercial banks. The study recommended that commercial banks should strengthen its loan lending procedures, use the services of Credit Reference Bureau, train credit officers on how to scrutinize customers and give out loans which have collateral security only. Keywords : Loan lending policies, interest rate regulation, credit risk, non-performing loans financial performance, commercial banks DOI: 10.7176/RJFA/12-4-05 Publication date: February 28 th 2021

Effect of Interest Rate Regulation on the Relationship Between Loan Underwriting Procedures and Financial Performance of Commercial Banks in Kenya

The first objective was to determine the relationship between collateral requirements (credit history of customer, customer income) and financial performance of commercial banks in Kenya. The second objective was to determine the effect of interest rate regulation on the relationship between loan underwriting procedures and financial performance of commercial banks in Kenya. The study used descriptive and correlation research design and the research philosophy used was positivism. The study adopted a census survey and purposive sampling method targeting 43 bank managers, 43 credit managers and 43 operations managers of the 43 commercial banks in Kenya for period 2013 to 2018. Document analysis guide was used to collect secondary quantitative data for period 2013 to 2018 from the commercial bank’s financial reports and questionnaires were used to collect primary data. Data was analyzed using multiple linear regression method. The findings of the study revealed that loan underwriting procedures; collateral requirements measured by (credit history of customer and customer income) have a significant and negative impact on ROA of commercial banks in Kenya. The study findings revealed that there exists a relationship between interest rate regulation, loan underwriting procedures and financial performance of commercial banks in Kenya. The study recommended that commercial banks should strengthen its loan underwriting procedures, use the services of Credit Reference Bureau, train credit officers on how to scrutinize customers and give out loans which have collateral security only. Keywords : Loan underwriting, interest rate regulation, financial performance, commercial banks, collateral requirements. DOI: 10.7176/RJFA/12-4-04 Publication date: February 28 th 2021

Assessing the Access to Finance by Small and Medium-Sized Enterprises from Financial Institutions in Blantyre City-Malawi

SMEs are an integral part of the economy in Malawi. The paper assesses the access to finance by SMEs from financial institutions in Malawi by highlighting the obstacles that SMEs face in their effort to raise finance. The quantitative research approach was adopted in conducting the study. Questionnaires were circulated to 100 SMEs in the City of Blantyre-Ginnery Corner and the SMEs were selected using the random sampling techniques. The following major findings were revealed.  There are financial institutions that are willing to provide funds to SMEs for growth and expansion but most Malawian SMEs fail to meet the lending requirements demanded by these institutions. Chief amongst these is the inability by most SMEs to provide collateral or security and audited financial statements for their businesses. On the other hand, for the small number that is able to access finance, they are faced with high interest rates which make it very difficult for them to grow. The other constraints include lack of finance, stiff competition in the sector, high taxes and corruption and bribes to access contracts. Another interesting revelation is that SMEs relationship with their bankers is not healthy. Most SMEs consider their relationship to be average despite recent focus by the banks on SMEs businesses. The study recommends the enforcement of the Credit Reference Bureau Act 2010 to help financial institutions identify and lend to creditworthy SMEs; banks should soften their adverse risk attitude of over reliance on collateral rather than on business cash flows. The government should also consider provision of tax incentives to banks’ lending to SMEs; stabilisation of the economy to achieve lower inflation and interest rates and formulation of government policy on SMEs that would compel Ministries, Departments and Agencies to allocate a proportion of contracts to SMEs in any tender. Lastly, financial institutions should revisit their approach to SME banking.

THE IMPACT ASSESMENT OF THE MICRO FINANCE TO FINANCIAL INCLUSION AND BISUNESS GROWTH: A STUDY OF THE MICRO, SMALL AND MEDIUM ENTERPRISES IN IGEMBE SOUTH (KENYA)

Purpose: The purpose of this study was to assess the impact of microfinance on financial inclusion and business growth in Igembe South District Kenya.Methodology: Descriptive research was used in discovering the research objectives. The research targeted the micro, small and medium sized businesses operating in Maua town (Igembe south District), 2181 of which were registered and licensed. A sample of 280 businesses (12.84% of the population) participated in the study.Results: This study revealed that microfinance institutions played a major role in improving financial inclusion among the small business owners who previous research has shown that they have been traditionally excluded from the formal banking systems. 78% of the respondents had access to the micro finance services while 60% had active microcredit in the preceding 12 months. It was clear that the microfinance institutions were cultivating the culture of saving among the micro entrepreneurs. However, most of the new businesses specifically those less than one year of age minimally benefitted from the micro finance services. It was also noted that default risk among the small businesses remains to be a challenge that micro credit lenders have to overcome for continued services provision. Working capital requirement was the leading reason for borrowing from micro finance institutions by the businesses.Unique contribution to theory, practice and policy: The study found that there was a good complementation between the existing micro finance institutions and the public entrepreneurial programs initiated by the government of Kenya such as Youth Entrepreneurs Development Fund, Women Enterprise Fund, Uwezo Fund and other County governments initiatives. The study recommended that the microfinance institutions should also be included in the distribution channel of these public funds for stronger linkage with the target groups. The MFIs should also utilize Credit Reference Bureau services to reduce the problem of default.

Financial Access Under the Microscope

We examine the impact of a large-scale microcredit expansion program on financial access and the transition of previously unbanked borrowers to commercial banks. Using administrative micro-data covering the universe of loans to individuals from a developing country, we show that the program significantly increased access to credit, particularly in less developed areas. This effect is driven by the newly set-up credit cooperatives (U-SACCOs), which grant loans to previously unbanked individuals. A sizable share of first-time borrowers who need a second loan switch to commercial banks, which cream-skim low-risk borrowers and grant them larger, cheaper, and longer-term loans. These borrowers are not riskier than similar individuals already at commercial banks and only initially receive smaller loans. Our results suggest that the microfinance sector, together with a well-functioning credit reference bureau, help mitigate information frictions in credit markets.

Determinants of Financial Inclusion Strategies Adoption by Savings and Credit Cooperatives in Kirinyaga County

This study sought to analyse determinants of adoption of financial inclusion strategies in SACCOs in Kirinyaga County. Specifically, the study sought to analyze the effect of financial resources, and loan repayment on adoption of financial inclusion strategies. The study was guided by the theory of the firm and information asymmetry theory. The target population was SACCOs in Kirinyaga County. Purposive sampling was conducted to recruit study a sample of 246 persons. Primary and secondary data were collected. Descriptive methods (frequencies, percentages, mean and standard deviation) were used to analyse data. Regression analysis was conducted to assess relationships between variables and test hypotheses. Findings were presented in the form of tables and figures. ANOVA test revealed that selected variables were significant (p=0.00) to financial inclusion in SACCOs. The findings indicated that the variables under investigation contributed 63% to financial inclusion. The findings showed that financial resources (p=0.00) and loan repayment (p=0.00) were all significant at 95% confidence level. The study concluded that the determinants of financial inclusion in order of magnitude are financial resources and loan repayment. The study recommended that more SACCOs should embrace utilization of credit reference bureau.

EFFECTIVENESS OF CREDIT REFERENCE BUREAU ON ENHANCING FINANCIAL PERFORMANCE

The study examined the effectiveness of credit reference bureau on the financial Performance in financial institutions in Nakuru County. The Study used a survey study research design. The population of the study involved 210 employees of financial institutions in Nakuru County. The study obtained primary data by the use of self- administered Questionnaires while review of related literature was used to collect secondary Data. The Primary data was analyzed using descriptive statistics. The researcher used the statistical Package for Social Sciences (SPSS) version 17 in analysis for the Study. The findings of the study were expected to provide a source of information for banking professionals to understand, control and to reduce the impact of increasing non-performing loans from the economy due to credit risk. CRB has played a significant role in as far as risk identification and monitoring is concerned. Moreover, CRB has significantly helped reduce the rate of loan default in the economy as well as increasing credit access. Lastly, it has led to a reduction in the level of moral hazard in financial institutions in Nakuru county.It has been deduced that clients are not getting appropriately rewarded for having a good credit repayment history. Measures need to be put in place to ensure that clients get an advantage for promptly repaying their loans in terms of the interest rate they pay. It is hoped that this will help cushion those with a good credit rating from CRB hence increasing efficiency in the banking sector.

DETERMINANTS OF INTEREST RATE SPREAD AMONG COMMERCIAL BANKS IN KENYA

Purpose: This study sought to find the determinant of interest rate spread among commercial banks in Kenya.Methodology: The study used a descriptive research design. The target population of this study included all the commercial banks in Kenya since the small number of population called for a census survey of all the banks. The study used secondary data which includes the governments’ publications, journals, banking survey reports, annual reports of the Commercial banks in Kenya and periodicals. Quantitative data was collected. Secondary data used to calculate interest rate spread was collected from the annual statements of the sampled commercial banks. The study used both descriptive and inferential statistics. The descriptive statistics included trend analysis, mean and standard deviation. The study used a pooled OLS regression model to analyze the relationship between the independent and dependent variables.Results: The regression results indicate that there is a positive and significant relationship between market structure and interest spread. This finding was supported by a regression coefficient of 0.200 (p value = 0.000). The reported p value was less than the critical p value of 0.05. The results also indicated that there is a positive and significant relationship between credit risk and interest spread. This finding was supported by a regression coefficient of 0.096 (p value = 0.008). The reported p value was less than the critical p value of 0.05. This implies that an increase in credit risk by one unit would result to an increase in the interest spread by 0.096 units. Further, the results indicate that there is a positive but insignificant relationship between access to information and interest spread. The regression results also indicated that there is a negative and significant relationship between regulation and interest spread. This finding was supported by a regression coefficient of -1.309 (p value = 0.000). The reported p value was less than the critical p value of 0.05.Unique contribution to theory, practice and policy: The study recommended that commercial banks should be encouraged to use the information from the credit reference bureaus so as to maintain a lower interest spread among Commercial banks in Kenya. The study also recommended that the central bank should licence more CRBs which would assist the commercial banks in lowering the credit risk. the study recommended that the central bank should review the monetary policy and lower the T- bill (91 days). This would help to lower the interest spread among Commercial banks in Kenya.

EFFECT OF INFORMATION SHARING FUNCTION ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES

Purpose: The objective of the study was to establish effect of credit information sharing on financial performance of SACCOs in Kenya. Studies have indicated that countries are establishing credit registries to reduce defaults, caused by information asymmetry, which have been a crisis for most financial institutions. Various financial institutions including SACCOs which have the business of lending are currently subjecting their customers in credit reference bureaus. Literature indicates that credit defaults have continued to pose financial crisis for financial institutions. Many studies done indicate that credit default is caused by lack or inadequate accurate credit information. In Kenya, through the Banking Act of 2009 saw the establishment of the first credit reference bureau in 2010 where individuals and business entities were to be subjected to CRBs. This study sought to establish the effect of information sharing on financial performance of SACCOs in Kenya. The study adopted a descriptive research design which was both quantitative and qualitative. The target population was 181 and a sample of 135 (74.5%) licensed deposit taking SACCOs as at 31st December 2014 was used. The choice of the licensed deposit taking SACCOs in Kenya was very objective since they offer employment opportunities for our youth. In most cases SACCOs deal with a larger group of clients from the informal sector as opposed to other financial institutions like banks and so it was possible to obtain information that is representative of Kenya. Secondary data was collected from published financial records and CRBs while primary data was collected through questionnaires which were administered to the top managers of the SACCOs. The study established that credit information sharing has a significant and positive relationship with financial performance of the sampled SACCOs. The study highlights effect of credit information sharing with possible recommendations for improvement on financial performance.Findings: The study concluded that there was a significant and positive relationship between information sharing function and financial performance thus the existence of credit reference bureaus was suitable for improving financial performance of SACCOs. Thus Credit reference bureaus have led to share of negative credit reports; Credit reference bureaus have led to improved defaults rate of borrowers, improved lenders response rate on credit lending and have reduced existence of privacy on borrowers' credit history.Recommendation: Credit information sharing should be addressed through networking of all credit information amongst lenders so that lenders can have readily available credit information, both positive and negative, on the borrowers which would be shared across all lenders.

FACTORS AFFECTING THE GROWTH OF SMES: A STUDY OF SMES IN KAJIADO DISTRICT

Purpose: The study was an assessment of factors affecting the growth of SMEs in the case of SMEs in Kajiado District.Methodology: The study adopted a descriptive case study design. A sample of 42 SMEs was taken out of a population of 420 SMEs. This represented 10% of the population. Systematic random sampling was used to select the actual SMEs to be included in the sample. A questionnaire was the preferred data collection tool. It contained both open and close ended questions. A Likert scale was used to establish the extent to which respondents agree or disagree with research questions. The data was analyzed by the use of descriptive statistics such as mean mode, medians, and percentages. The findings of the study were presented using tables and graphs and bar charts.Results: Findings in this study indicated that that the generic causes of SME failure in Kajiado District were access to finance, competition, technology, regulatory framework. The root causes of SME failure in Kajiado District were management incompetence and poor working capital management. The study also concluded that the root and generic causes identified in ILO (1972) are still persistent despite efforts by policy makers to address the causes.Unique contribution to theory, practice and policy: It was recommended that the financial institutions and microfinance institutions offering finance should also offer training on working capital management to SMEs. The ministry of labor in a joint effort with the ministry of education should engage both private firms and NGOs in rolling out training services through e-learning with the support of emerging technologies such as internet and computers. It was also recommended that SMEs should increase their uptake of technologies in order to improve on their product quality. The ministry for justice should address the issues surrounding the poor regulatory framework by ensuring that the backlog of court cases is addressed. Emphasis should be laid on the value addition of products and the development of local, regional and international markets. The credit reference bureaus is a welcome move in addressing the information asymmetry brought about by the inherent moral hazard and adverse selection in SMEs.

An Assessment of the Role of Credit Reference Bureau in Influencing Risk Identification in Mitigating Credit Default in Commercial Banks in Kenya

An Assessment of the Role of Credit Reference Bureau in Influencing Risk Identification in Mitigating Credit Default in Commercial Banks in Kenya

An Assessment of the Role of Credit Reference Bureau in Influencing Customer Credit Access in Mitigating Against Credit Default in Commercial Banks in Kenya

An Assessment of the Role of Credit Reference Bureau in Influencing Customer Credit Access in Mitigating Against Credit Default in Commercial Banks in Kenya

EFFECT OF CONSUMER PROTECTION FUNCTION ON FINANCIAL PERFORMANCE OF SACCOS IN KENYA

Purpose: The study sought to determine the effect of consumer protection function on financial performance of SACCOs in Kenya.Methodology: The study adopted a descriptive research design. The target population comprised of registered 181 deposit-taking SACCOs as at 31st December 2014 and the three licensed CRBs in Kenya. Stratified random sampling was used in the study, where SACCOs were grouped into five respective strata which were then randomly selected. The SACCOs were grouped into five respective strata of government based, teachers based, farmers based, private institutions based and community based. The study sampled 135 of the 181 (74.5%) licensed deposit taking SACCOs since these were the only licensed deposit-taking SACCOs by 2014. The choice of the licensed deposit taking SACCOs in Kenya was very objective since it was possible to obtain information that is representative of Kenya. In addition, SACCOs form the smaller arm in the financial sector and in most cases deals with a larger group of clients from the informal sector as opposed to other financial institutions like banks. Both primary and secondary data were analyzed using SPSS software, and statistics generated included descriptive statistics and inferential statistics. The particular descriptive statistics used included frequencies and percentages while the particular inferential statistics included Pearson correlation analysis and regression. Correlation analysis was used to establish relationships between the consumer protection function and financial performances. Regression analysis was used to establish the significance of the variables and the degree of causal effect of the independent variables on the dependent variable. The hypotheses testing were conducted using simple regression model.Findings: From the data analysis the study concluded that there was a significant and positive relationship between consumer protection function and financial performance thus the existence of credit reference bureaus was suitable for improving financial performance of SACCOs. This implies that that Credit reference bureaus have led to consumer protection and increased customers’ rights. Similarly, credit reference bureaus have led to assumption that borrowing is a right regardless of capabilities. Credit reference bureaus have reduces undesired monopolistic actions of lenders. Lastly, credit reference bureaus have led to reduced bad “culture” on loan repayment.Recommendation: The study recommended that lenders should ensure that they have accurate information before listing the unworthy borrowers to avoid unnecessary legal battles which may affect performance as a measure for customer rights protection.