THE EFFECT OF CREDIT RISK MANAGEMENT ON PROFITABILITY OF SACCOS IN RWANDA – International Journal of Social Sciences and Management Review

THE EFFECT OF CREDIT RISK MANAGEMENT ON PROFITABILITY OF SACCOS IN RWANDA

Author: Dr Rudahigwa Oswald PhD

ABSTRACT

Loan management as methods and strategies adopted by a firm to ensure that they maintain an optimal level of credit and its effective management and with references to financial statements of SACCO in Kayonza District, there was a decline in profitability. The effect of credit risk management on profitability of saccos in Rwanda.The population of the study comprises of 36 employees SACCOs in Kayonza District. The sample size was 36 employees obtained using purposive sampling technique. Questionnaire and documentary review were used as sampling technique of data collection. Descriptive and inferential statistics such as multiple linear regressions were used to analyse data. The findings revealed that revealed the client appraisal is not to be significantly related to profitability of SACCOs. The findings revealed that loan risk management was significantly and positively related to profitability of SACCOs in Kayonza District. The findings revealed that loan recovery management was significantly and positively relate to profitability of SACCOs. However, there a decline in profitability where where the average of NPM in both three SACCOs of Kayonza District was 7.2% in 2020, 27.1% in 2021 while in 2022 was 15.4%. The average of ROA in both three SACCOs of Kayonza District was 0.88% in 2020, 5% in 2021 and in 2022 was 2.5%. The average of ROE in both three SACCOs of Kayonza District was 4.1% in 2020, 13.1% in 2021 was and in 2022 was 9.8%. The study concluded that that use of loan risk management and loan recovery management led to significant increase in profitability of SACCOs and their researcher recommended that lowering non-performing loans to total loan would significantly lead to increase in profitability and client appraisal should be emphasised when considering the character of the customers seeking credit facilities and aspects of collateral should considered while appraising clients.

Keywords: SACCO, loan, client appraisal, loan risk and loan recovery and profitability

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