Effect Of Loan Policies On Financial Performance Of Church Based Savings And Credit Co-operative Societies In Kenya

Abstract

Savings and Credit Co-operatives Societies sector in Kenya has been very vibrant. It has grown to touch every part of our society and sector, but in all these sectors SACCOs are required to adhere to certain loan policies and regulations set by management internally and by SACCO Societies act (2008) for them to be financially sustainable. Therefore the objective of this study was to provide an understanding of how loan policies affect the financial performance of church based SACCO’s and bridge the knowledge gap that exists. This study was geared to provide an understanding on how specific loan policies affect the financial performance of SACCO’s established and run by churches in Kenya in order to bond the knowledge gap that may have existed. The study adopted descriptive research design study in which secondary data from SASRA reports and the published audited financial statements. The data was gathered between the period 2011 to 2015 for 33 church based SACCOs both registered by SASRA and those regulated by county cooperative commissioner. The study made use of regression analysis to analyze the data by equating dependent variables to the independent variable. All the hypotheses were tested by the researcher in the study and the findings were presented using tables. STATA was utilized to analyze the data collected in this research, as the researcher deems it to be the most appropriate, given its versatility and considering the nature of the data collected. The study found that, loan policies have insignificant effect on ROA of church based SACCOs according to the evidences gathered since the p-values where more than the acceptable significance level therefore there is a weak negative relationship between loans lending policies and ROA. There is also weak positive relationship between non performing loan and ROA as well as loan insurance cover policy with ROA. The study recommends that this SACCOs should review their loan policies regularly in order for them to remain competitive against changing financial environment.