Credit Management Practice, SACCO Size and Financial Sustainability of Deposit Taking Saving and Credit Co-Operatives in Kenya

Abstract

Purpose:Deposit Taking Saving and Credit Co-operatives facilitates financial intermediation, inclusion and deepening. In spite of this, 30 percent do not operate with prudent credit management practices attributed to unremitted deductions by employer institutions or borrowers’ default and unskilled employees. This makes them prone to de-licensing for being financially vulnerable thus, putting members’ funds at risk. This is still a puzzle even with the investment by the government on an oversight authoritythat can ensure they are compliant to the regulations so as to maintain financial sustainability. This study was conducted to establish the moderating effect of SACCO size on credit management practice and financial sustainability. The information asymmetry theory was adopted where the study population was the Kenya Deposit Taking Saving and Credit Co-operatives. Design and Methodology:A descriptive cross-sectional survey design with a positivism philosophical paradigm where the sample size was 119 respondents out of which 95 percent responded. Emailed questionnaire and data collection sheet were used in data collection. Findings:A binary logistic regression was carried out where it was established that with presence of a moderator for the independent sub-variables, the strength of relationship between variables didn’t change (Nagelkerke R2 = 20.1 percent) but with introduction of interaction term, the strength of relationship between variables changed (Nagelkerke R2 = 27.2 percent). However, the relationship strength between variables didn’t change with presence of a moderator for the independent variable (Nagelkerke R2 = 19.9 percent). Conclusion and recommendation:This study thus, concluded that SACCO size had a significant moderating effect on the independent sub-variables but the overall independent variable did not show any significance. This study recommended that SACCO size should only be considered while addressing credit risk mitigation and staff competence of DT-SACCOs in an effort to improve their financial sustainability.