Establishing the Relationship between Credit Risk Assessment and Financial Performance of SACCOs in Rwanda, Ngororero District
- March 17, 2020
- Posted by: RSIS
- Categories: IJRISS, Social Science
International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue II, February 2020 | ISSN 2454–6186
Dr. SENDAGI MUHAMMAD, Dr. Benard Nuwatuhaire (PhD), MURWANASHYAKA Innocent, Uwimana Ndiyaye Innocent
Kigali Independent University (ULK), Rwanda
Abstract:- The study set out to investigate the Relationship between credit risk assessment and financial performance of SACCOs in Rwanda. Ngororero District. The study adopted cross-sectional and correlational research designs on a sample of 30 respondents using a self-administered and an interview guide. Data were analysed using both quantitative and qualitative data methods. Quantitative data were analyzed using descriptive and inferential statistics in SPSS (21.0) while qualitative data was thematically integrated into quantitative results after content analysis. The study established a positive significant correlation (r=0.245, p<0.05) between credit risk assessment and the financial performance of SACCOs. It was concluded that improving on credit risk assessment would significantly improve on the financial performance of SACCOs in Rwanda, Ngororero District. It was recommended that The management of SACCOs therefore should Employ technically capable professionals to accurately ascertain amount of loan exposed to default and make timely provisions for such losses in their accounting reports so as the prudently report returns and profits.
Key words: Credit risk assessment, Financial Performance.
I. INTRODUCTION
Effective credit risk management through Credit risk assessment, risk assessment and credit monitoring with the oversight of a well-established credit management structure enhances the performance of lending institutions (Basel Committee on Bank Supervision, 2003; Brealey, et al., 2008; Hoque, 2015). Despite the emphasis put on credit risk management through credit risk identification, to enhance the financial performance of SACCOs, undesirable financial performance continues to affect SACCOs in Rwanda, Ngororero District.
Theoretical Review
The theory that underpinned this study was the Harry Markowitz’s modern portfolio theory (MPT). The theory provides a framework for specifying and measuring investment risk and to develop relationships between risk and expected returns. Its main basic assumption is that investors often want to maximize returns from their investments for a given level of risk (Brealey, Myers & Allen, 2008).
