Credit Lending Models and Loan Performance of Deposit-Taking Savings and Credit Cooperative Societies in Kenya

Abstract

The study sought to determine the effect of credit lending models on loan performance of deposit-taking savings and credit cooperative societies in Kenya. Specifically, the study focused on group lending model, individual lending model, digital credit model and cooperative lending model on loan performance of deposit-taking savings and credit cooperative societies in Kenya. The study adopted a descriptive cross-sectional design. The targeted population was all DT-SACCOs as per their registration with SACCO Societies Regulatory Authority. The study population was 176. The study found out that group lending models, individual lending models, digital credit lending and cooperative lending were adopted by the DT-SACCOs to a moderate extent. The study established that the size of the DT-SACCOs and the lending models used accounted for 97.9% of changes in loan performance. The consequence is that other factors not considered in the model were responsible for only 2.1% of variances in loan performance. Further, credit lending models had a significant effect on the loan performance of DT-SACCOs in Kenya. This implied that effective implementation of the credit lending models led to improved loan performance of DT-SACCOs. The study concluded that credit lending models significantly affect the loan performance of DT-SACCOs in Kenya. Further, the DT-SACCOs adopted, on an average basis, the credit lending models. Lastly, individual lending models and total assets significantly affected loan performance. Group lending models, digital lending models, and cooperative lending models, however, do not have a significant effect on loan performance. The study recommended that the managers of the DT-SACCOs should establish mechanisms for improving individual loan processing and the development of competitive individual loan products.