Effects of credit policy on financial performance of savings and credit cooperative societies at premier credit organization in Kampala Uganda
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Date
2019-06
Authors
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Publisher
Kampala International University, College of Economics and Management
Abstract
The purpose of this study was to investigate effects of credit policy on financial performance of savings and credit cooperative societies at premier credit Organization in Kampala Uganda. The specific objectives were to establish the effects of credit policy on the financial performance of SACCOs, examine the influence of credit policy on the financial performance of SACCOs and find out the financial performance of savings and credit cooperative societies at premier credit Organization in Kampala Uganda. Efficient credit policy influences sharing of information among financial institutions about borrowers, stabilizes interest rates, reduces nonperforming loans, increases deposits and increases credit extended to borrowers. In Uganda, credit management became widely adopted by regulated SACCOs to mitigate loan defaults and improve financial performance. This study sought to fill the existing knowledge gap by answering the question what is the effect of credit policy on financial performance of SASRA regulated SACCOs in Kampala. The study adopted correlation research design that consisted a population of all 40 SASRA Regulated SACCOs registered under the Societies Act in Kampala,
Uganda. The study employed purposive sampling technique in identifying the SACCOs and the respondents from the sampled SACCOs. A multivariate regression model of financial performance versus credit policies was applied to examine the relationship between the variables. The study revealed that regulated SACCOs had adopted credit standards as a credit policy and credit tenn policy loan ratio in determination of how much a client would borrow. The study revealed that regulated SACCOs were also applying collection policy, considering non-performing loans and total loans, loan—loss provision coverage ratio and application of credit policy which increased Return on Assets (ROA) for the regulated
SACCOs to a great extent. From the regression results, use of collection policy (Default
Rate) led to significant increase in ROA of regulated SACCOs indicating that lowering nonperforming loans to total loans would significantly lead to increase in profitability Data was also analyzed and presented with the aid of statistical package for social sciences
(SPSS). The findings indicated that credit policy significantly affect financial performance. In order to recover cash lost the management should take key issues on customer assessment and evaluation. The SACCO management should develop credit procedures, policies and analytical capabilities.
Description
A Research Report Submitted to the College of Economics and Management in Partial Fulfillment of the Requirements for the Award of a Bachelor Degree of Business Administration of Kampala International University Main Campus
Keywords
Credit policy, Financial performance, Savings and credit cooperative societies, Premier credit organization, Kampala Uganda