Loan Management and Financial Performance of Selected Savings and Credit Cooperatives in Kampala District, Uganda

ABSTRACT 

The study delved into Loan management and financial performance of the selected Savings and Credit Cooperatives (SACCO5) in Kampala District, Uganda. Specifically, the study sought: to determine the extent of loan management in the New Vision and Toyota Uganda’s SACCOs; to determine the level of financial performance; and to establish if there was a significant relationship between the extent of ioan management and level of financial performance of the New Vision and Toyota Uganda’s SACCOs. Using descriptive correiation and cross sectional survey designs, a sample of 173 respondents was selected and studied through a self-administered questionnaire. Frequency counts and percentage distribution were used to analyze data on the profile characteristics of the respondents; while means and ranks were used to determine the extent of loans management and the level of financial performance of the SACCOs. The study findings revealed as follows. First, the extent of loan management in both SACCOs is generally satisfactory (overall mean=2.57). Second, the level of financial performance was generally high (average mean=2.90). And thIrd, there is a positive significant relationship between the extent of loan management practices and financial performance of the two SACCO5 (r=0.619, sig. = 0.000) implying that an Improvement in the loan management practices of a SACCO is likely to increase its financial performance indicators. On the basis of the foregoing findings, It was concluded that the extent of loan management and the financial performance of the two SACCOs are generally satisfactory. Nevertheless, the loan management practices of these SACCOs significantly affect their financial performance and financial health. Besides, proper assessment of the credit worthiness of clients, credit period, decision to grant loans and securities, and penalties, significantly enhance the financial health of a SACCO. However, offering Incentives in form of discounts to encourage early repayment may worsen the financial performance of SACCOs. For these SACCOs to improve their financial performance, therefore, the researcher recommends as follows: the loans officers/managers should make sure that they give clients a specific date of repayment; the policy on repaymentdiscounts should be streamlined; the whole practice/polIcy on securities and penalties should be improved; there is need to reduce the number of defaulters; the need to increase investments In stocks; and to systematize the procedures for deciding to grant loans and credit period.

TABLE OF CONTENTS

Declaration ~ Ii

Declaration B .. ...lli

Dedication lv

Acknowledgement v

Table of contents vi

List of tables ix

Abstract x

CHAPTER ONE: THE PROBLEM AND ITS SCOPE........................,1

1.1 Background to the Study’ 1

1.1.1 Historical Perspective 1

1.1.2 Theoretical Perspective 3

1.1.3 Conceptual Perspective 4

1.1.4 Contextual Perspective 5

1.2 Staterrient of the problerri 7

1.3 Pur~ose of the study’ 8

1.4 Research Objectives 8

1.5 Research Questions 9

1.6 Hypothesis 9

1.7 Scope of study 9

1.8 Significance of the study’ 10

CHAPTER TWO: REVIEW OF RELATED LITERATURE..................12

2.1 TIieoretical Review 12

2.2 Conceptual Framework and Review 13

2.2.1 Conceptual Frameiwork .13

2.2.2 Conceptual Review .14

2.3 RelationshIp between Loan Management and Financial Performance of SP1CCOs. . ....28

2.4 Gaps identified in the literature .33

CHAPTER THREE: MEFHODOLOGY...........,........,........................34

3.1 ResearchDesign.. .34

3.2 Stud~c population .34

3.3 SarripleSize....35

3.4 Sariipling procedure 35

3.5 Data collection instruments 36

3.6 Validity and Reliability of the Instrument 36

3.7 Data Collection Procedure 37

3.8 Data 4nalysis 38

3.9 Ethical Consideration 39

3.10 Lirriitations of the Study 39

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPREIATION •...................................n.n..........41

4.1 Profile of Respondents 41

4.2 Extent of Loan Management in New Vision and Toyota SACCOs Kampala 44.

4.3 Level of Financial Performance in New Vision and Toyota SACCOs . .48

4.4 Relationship between Extent of Loan management and Level of

Financial Performance of the selected SACCO5 52

CHAPTER FIVE: DISCUSSION, CONCLUSIONS AND

RECOMMENDATIONS......••••••,•• Ill......I •~~•~••••• ~ .11.56

5.1 Discussion of Findings 56

5.1.1 Extent of Loan Management in New Vision and Toyota SACCOs Kampala 56

5.1.2 Level of Financial Performance in New Vision and Toyota SACCOs

5.1.3 Relationship between Extent of Loan management and Level of Financial Perforrmiance 59

5.2 Conclusions arising out of the study .62

5.2.1 Extent of Loan Management in New Vision and Toyota SACCOs Kampala 62

5.2.2 Level of Financial Performance in New Vision and Toyota SACCO5 62

5.2.3 Relationship between Extent of Loan management and Level of Financial Performance 63

5.3 Recommendations 63

5.4 Areas for further research 65

References 66

Appendices 72