CREDIT ADMINISTRATION AND FINANCIAL STABILITY OF NON-WITHDRAWABLE DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE ORGANIZATIONS IN KIAMBU COUNTY, KENYA

Abstract

Savings and Credit Cooperative Organizations (SACCOs), member-owned financial institutions, have faced financial instability due to ineffective credit management. The study investigated the financial instability of Non-Withdrawable Deposit Taking SACCOs in Kiambu County, Kenya, focusing on the impact of credit administration practices. The research aimed to assess how credit risk management, credit worthiness, credit policy, and credit information sharing affect financial stability. Anchored on loanable funds, agency, liquidity preference, and profit maximization theories, the study used a cross-sectional design targeting all 17 SACCOs in the county. Stratified sampling selected respondents, and data spanning 2020–2024 was collected via structured questionnaires, pretested in two SACCOs. Descriptive statistics and simple linear regression analysis were employed as the data analysis techniques, with diagnostic tests for normality, multicollinearity, and heteroscedasticity conducted beforehand. Credit risk management practices, including thorough risk identification (M=4.241), efficient mitigation (M=3.177), and strict adherence to credit approval processes (M=4.190), these shows efficient credit risk management boosts financial stability. The study recommends legislative reinforcement of SACCO regulations through mandatory information sharing, robust risk management, and structured credit scoring. SACCOs should adopt transparent lending practices, proactive risk strategies, strong internal systems, and clear credit policies. The results support financial intermediation and credit risk theories, highlighting the integration of policy, credit worthiness, and information sharing for sustainability. Future research should explore regulation, fintech innovations, rural-urban disparities, cultural factors, and long-term impacts on SACCO stability.