INTEREST LENDING RATES AND CREDIT POLICY AND HOW THEY DETERMINELOAN REPAYMENT IN KENYA: A CASE STUDY OF DEPOIT TAKING SACCOS IN KENYA

Abstract

The researcher studied deposit-taking Saccos in Nairobi County to find out the determinants of loan repayment in Kenya. The Kenya Financial Sector comprises banks, microfinances and SACCOs, however due to their competitive lending charges and affordable options the latter have, contributed a great deal in economic prosperity through advancement of capital, savings mobilization and wealth creation to young and existing entrepreneurs as well as big corporate entities. However, while the above hold true the financial industry has been suffered the blow of poor loan repayment by the borrowers. In view of the above, two specific objectives acted as the independent variables influencing loan repayment in the DTSs this comprised to; determine the influence of interest lending rates, explore the influence of credit policy on loan repayment in DTSs. in Kenya. The Agency Theory was used as the main theoretical framework and anchored on the Fisher Interest Rates Theory. Descriptive Research Design was adopted, using a target population of 92 employees, which delivered the appropriate sample of 46 respondents to facilitate data collection using closed and open-ended questionnaire delivered to the respondents, which were accurately and precisely designed and easy to fill. Finally, multiple linear regression model, charts and bar graphs were used for data analysis and presentation. Study results indicated interest lending rates in deposit taking Saccos to have a big impact on loan repayment, in that, it favourably and adversely affected loan repayment accordingly, the credit policy seemed to quite significantly impact on the loan repayment. In conclusion, lending rates significant impacted on loan repayment, credit policy ought to be fully and well implemented. The study recommended proper internal control system to monitor and control those specific variables from being over ridded by the loan officers. Same area of study should be advanced to MFIs and explore other variables like open loan guarantors, member education, collateral adequacy and leadership style.