INFLUENCE OF CREDIT RISK STRATEGIES ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING COOPERATIVE SOCIETIES IN MOMBASA COUNTY, KENYA

Abstract

The performance of SACCOs in Kenya has been wanting in the recent past, this scenario occasioned the collapse of some SACCOs such as the Maseno builders and the Ekeza SACCOs. These poor performance instances in the SACCO sector motivated this current research study. The main objective of this study was to investigate the influence of credit risk strategies on the financial performance of deposit-taking cooperative societies in Mombasa County, Kenya. The specific objectives of this study comprised of an investigation on the influence of credit risk supervision strategies, diversification of loan strategies, Proactive risk communication strategies, and Technology Adoption strategies on the financial performance of deposit-taking cooperative societies in Mombasa County, Kenya. The theories which were used in supporting this study comprised of the Agency theory, Credit theory, Modern Portfolio Theory and the Resource-Based View Theory. This study used the descriptive research design. The target population for the study consisted of 109 participants from the finance, internal audit and Loan departments across all six deposit-taking SACCOs in Mombasa County. The samples size for this study comprised of 86 units of analysis which was determined via the Yamane Taro 1967 sample size determination formular. The ultimate selection of the sample size from the target population was conducted via the stratified random sampling technique. This current research study used questionnaires as the tool for data collection. A pilot test was conducted with a sample of 8 (10% of 86) randomly selected respondents from the deposit-taking SACCOs in Mombasa County. The regression model in the Statistical Package for Social Sciences version 26 was used in data analysis. The regression statistics from the model were used in testing the hypothesis. The hypothesis testing led to the rejection of H01, H02, H03 and H04, thus indicated that Credit Risk supervision strategies, Diversification of loan strategies, Proactive risk communication strategies and Technology adoption strategies have a significant positive influence on the financial performance of DT SACCOS in Mombasa County, Kenya. The researcher therefore recommends that DT SACCOS in Mombasa County, Kenya should take advantage of the credit risk strategies at their disposal and 16 implement them because they have a significant influence on their financial performance