Examining the Relationship between Credit Risk Identification 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. Benard Nuwatuhaire (PhD), Dr. SENDAGI MUHAMMAD, Uwimana Ndiyaye innocent, MURWANASHYAKA Innocent
Kigali independent University (ULK), Rwanda
Abstract:- The study set out to investigate the Relationship Between Credit Risk Identification 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 relationship (r=0.633, p<0.01) between credit risk identification and the financial performance of SACCOs. It was concluded that improving on credit risk identification would significantly improve on the financial performance of SACCOs in Ngororero District. It was recommended that the oversight role of management should be aligned with specific areas of risk identification such as consumer or commercial loans risk for it to have a significant contribution on the financial performance of these institutions.
Key words: Credit Risk identification, Financial Performance.
I. INTRODUCTION
Effective credit risk management through credit risk identification, 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 continue 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).
