What question did this study set out to answer?

This research aims to analyze how loan portfolio management affects the financial performance of DT-SACCOs in Kenya.

June 14, 2026

Loan Portfolio Management and the Financial Performance of Deposit-Taking Savings and Credit Co-operative Societies in Kenya

Key Points

This research aims to analyze how loan portfolio management affects the financial performance of DT-SACCOs in Kenya.
Census of 176 licensed DT-SACCOs in Kenya, with 259 usable questionnaires collected.
Analyses included descriptive statistics, Pearson correlation, and simple linear regression.
In-depth interviews conducted with twelve senior officers to complement quantitative findings.
Loan portfolio management significantly improved financial performance (r = 0.671; β = 0.671; p < .001).
Explained 45.0% of the variation in financial performance (R² = 0.450).
Identified themes included credit risk management, member-sensitive lending, and the importance of provisioning.

Abstract

The loan portfolio is the principal earning asset of a deposit-taking savings and credit co-operative society, and its management is therefore central to financial performance, yet rising non-performing loans continue to threaten the sub-sector in Kenya. This study examined the effect of loan portfolio management on the financial performance of deposit-taking savings and credit co-operative societies (DT-SACCOs) in Kenya. The study was anchored on the Information Asymmetry Theory, the Transaction Cost Theory and the 5 C’s Model of Client Appraisal, and it adopted a pragmatism philosophy and a convergent mixed-methods design. The target population comprised the 176 licensed DT-SACCOs in Kenya, and a census of the 352 chief executive officers and chief finance officers of these societies was undertaken, complemented by in-depth interviews with twelve senior officers. A total of 259 usable questionnaires were returned, a response rate of 73.6 per cent. Quantitative data were analysed using descriptive statistics, Pearson correlation and simple linear regression, while qualitative data were analysed thematically. The findings showed that loan portfolio management had a positive and statistically significant effect on financial performance (r = 0.671; β = 0.671; R² = 0.450; F(1, 257) = 210.31; p < .001), explaining 45.0 per cent of the variation in financial performance and emerging as the strongest single determinant examined in the wider study. The interview evidence revealed three themes, namely the centrality of credit risk, member-sensitive lending against the enforcement of credit terms, and the governance of provisioning, which together showed that loan portfolio management depends on sound information, well-designed credit terms and the protection of provisioning. The study concludes that loan portfolio management is the dominant internal driver of DT-SACCO financial performance, and it recommends that societies strengthen their credit appraisal, monitoring, recovery and provisioning practices within board-approved policy.

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