Investigating the Relationship between Credit Risk Monitoring 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, MURWANASHYAKA Innocent, Uwimana Ndiyaye Innocent
Kigali independent University (ULK), Rwanda
Abstract:- The study set out to the relationship between credit monitoring 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<0.01) between credit risk monitoring and the financial performance of SACCOs. It was concluded that improving on credit risk monitoring would significantly improve on the financial performance of SACCOs in Rwanda, Ngororero District. It was recommended that the management of SACCOs therefore should Always ensure detailed documentation of the clients details regarding the loan of the individual client. The management should train further to identify these details which they can incorporate into their loaning system, emphasize adherence to the present credit terms. In this regard, they should agree with their employees on targets such that they are attainable without defying credit terms and motivate employees to ensure timely reporting of problem loans.
Key words: Credit Risk monitoring , Financial Performance and Credit terms
I. INTRODUCTION
As part of its credit risk monitoring process, the Basel Committee for Banking Supervision (2006), states that a lending institution should develop and implement comprehensive procedures and information systems to monitor the quality of its loan portfolio. Despite the emphasis put on credit risk monitoring 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).
