Credit Risk Management and Financial Performance of Savings and Credit Co-operative Organizations: A Case of Selected SACCOs in Makindye Division, Kampala Uganda

Abstract

The purpose of this paper is to assess the effect of credit risk management on the financial performance of Savings and Credit Co-operative Organizations (SACCOs) in Makindye division, Kampala. Specifically, the paper looked at how credit risk identification, credit risk assessment and credit risk control affect the way that SACCOs perform financially. A cross-sectional field survey design that adopted both qualitative and quantitative approaches to collecting and analyzing data was adopted. Twenty (20) registered active SACCOs were purposively selected from Makindye Division for data collection using both questionnaires and interview guides. Data was collected from managers, treasurers or accountants, and secretaries of the registered SACCOs. Descriptive and inferential statistics were generated and interpreted to meet the study objectives. Findings showed that credit risk management has a positive and significant effect on the financial performance of SACCOs. This implies that the way a SACCO performs financially is influenced by the way credit risk is identified, assessed and controlled within that SACCO. SACCOs should train their members on strategies of identifying, assessing as well as controlling risks if they are to register and sustain good financial performance. This paper contributes to literature in regard to credit risk management strategies within SACCOs in Uganda.