Abstract:
This research was conducted with the purpose of establishing the effects of loan repayment on
the financial performance of the SACCOs. Lending is the act of granting someone, the use of
something on the understanding that it shall be returned. According to Investopedia dictionary,
lending can be understood where, someone makes funds available to another with the
expectation that the funds will be repaid, plus any interest and/or fees. Savings and Credit
Cooperative societies’ core business is mobilizing savings from members, and then providing
them with credit at affordable interest rates. However SACCOs have received stiff competition
from commercial banks, who have diversified their products. SACCOs on their side have
increased their credit facilities through increasing the amount of loans they give to their members
including rebranding their products. In revising their terms and increasing credit, SACCOs have
been able to maintain their loyal members. The general objective of this study was to investigate
the effect of loan repayment on the financial performance of the Savings and Credit Cooperative
Societies. The specific objectives of the study were; to determine the effect of lending interest
rate on loan repayment advanced to the SACCO members, to investigate whether the loan
repayments has an effect on the profitability of the SACCOs in the banking sector, and finally, to
investigate whether the deposit volume of the SACCOs can influence financial performance of
the SACCOs in the banking sector. The research adopted a case study design. Data was
collected from secondary sources. The literature reviewed, published financial statements and
reports formed the basis of secondary data. Data was analyzed using descriptive statistics. The
study used multiple linear regression analysis on secondary data. The following variables were
entered in the regression: profitability, lending volume, loan repayment, lending interest rate and
total deposit value. The study would be of benefit to the management of Savings and Credit
Cooperative Societies since it highlighted the effect of the loan recoveries on the financial
performance of the SACCOs. The researcher used secondary data. The data was collected from
the SACCO financial statements and policies and partly from SASRA reports. The results of the
research showed that lending interest rate was inversely related to the financial performance of
the SACCO. The other variables showed a positive significant relationship with financial
performance. Of all the determinants of financial performance, the deposits have a coefficient of
0.932 followed by total repayment coefficient of 0.803 and total loans and advances coefficient
of 0.774. The lending interest rates had a coefficient of -0.888. The study thus recommends that
the SACCOs should device better methods of recovering their loans as a means of improving the
financial performance of the SACCOs. The study further called upon the government to
intervene in the financial institutions operations by providing an equal plat form upon which the
key players could compete. There is still need for further research on the topic to cover the areas
not targeted by the research for a better operation of the SACCOs.