Influence of Loan Collateral Security and Credit Appraisal on Loan Portfolio Performance of Deposit Taking Saccos in Nairobi City County, Kenya

Abstract

The key responsibility of the deposit taking Sacco's is to provide credit to consumers or rather members. Furthermore, lending has been and continues to be the backbone of Sacco's business, which is disastrous for emerging economies like Kenya, where capital markets are still underdeveloped. Nonetheless, lending activities have been controversial and a difficult matter given the credit management practices in the competitive environment. The current study endeavored to find out credit management practices and loan portfolio performance of deposit taking SACCOs in Nairobi city county, Kenya. The study looked at the influence of loan collateral security and credit appraisal on loan portfolio performance of deposit taking saccos in nairobi city county, kenya. This study employed a descriptive survey design. The study targeted credit managers of the forty five deposit taking Sacco's in Nairobi County-Kenya. Given that target population was less than 100, a census method. The study used structured questionnaire to collect primary data. The study used descriptive statistics, which included the use of frequencies, means, and standard deviation. In addition, multiple regression assumptions, model fit, ANOVA, and coefficients were used in the analysis. Credit management practices significantly influence loan portfolio performance among Deposit Taking Saccos in Nairobi. Therefore, this study recommended that credit committees of deposit taking Sacco's should always seek to review some policies such legal procedure and employee skill development in order to maximize profits. The study recommended, DTSs should craft viable and customized collateral security measures meant to reduce loan delinquency ratios while at the same time ensuring DTS's reputation and market share. The study recommended that DTS should establish appropriate credit appraisal methods to offer guidance in the issuance of credit.