INFLUENCE OF CREDIT RISK MANAGEMENT PRACTICES ON LOAN RECOVERY PERFORMANCE OF THE REGISTERED DIGITAL CREDIT PROVIDERS IN KENYA

Abstract

This research assessed how methods for managing credit risk affect the capacity of digital credit providers in Kenya to recoup loans. The study used a descriptive survey methodology, and its target population included all 32 of Kenya's registered digital lending enterprises, including both company managers and their credit managers. The study prioritized gathering primary data and used random sampling procedures. Multiple regression was used to measure the inferential data using Statistical Package for Social Sciences (SPSS) version 25. Credit Procedures had aggregate mean response of 4.240 and standard deviation of 1.040. Credit Appraisal had an overall mean response of 4.057, and an aggregate standard deviation of 1.162. Credit Monitoring had an aggregate mean of the responses of 4.089 and an overall standard deviation of 1.001. Credit Recovery Systems had an average response of 4.150 and an overall standard deviation of 1.162. Loan Recovery Performance had an aggregate mean of 4.067 with a total standard deviation of 1.116. The results presented a strong and significant correlation (r=0.438, p=0.000) between credit procedures, a strong and positive correlation (r=0.351, p=0.000) between credit monitoring methods, a strong and substantial correlation (r=0.229, p=0.000) between credit evaluation, a positively and significantly correlation between credit recovery systems (r=0.205, p=0.000) and loan recovery performance. This implied that a profit gain follows an increase in any of these variables. The findings indicate a positive correlation among all the parameters, with credit procedures being the strongest (r=0.700) influencer of loan recovery performance. The R-squared value was .774. All the independent variables, affect loan recovery performance by predicting it, according to the ANOVA table results (F= 4.691, p<0.0005). With all other factors held constant at zero, a unit increase of the independent variable; credit procedures, credit appraisal, credit monitoring or credit recovery systems, influence on loan recovery performance by 0.334, 0.372, 0.319 or 0.368 respectively. The study recommends that other scholars tackle, in the future, the other aspects of risk management, such as marketing risk, liquidity risk, etc, within digital lending firms.