Journal of Applied Finance & Banking

Credit Risk Management and Efficiency of Savings and Credit Cooperative Societies: A Review of Literature

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  • Abstract

     

    The objective of this paper was to conduct literature review on how credit risk management impacts efficiency and to identify the knowledge gaps in the relationship between the two variables. This study will help the government in policy direction as far as growing the financial sector as a precursor to credit risk management and its contribution to growth in terms of improved savings, improved per capita income, improved credit to private sector and increased employment levels both directly and indirectly. From the empirical studies reviewed, credit risk management was found to influence financial performance but there is no concrete evidence on the relation that credit risk management has with efficiency of SACCOs. The previous studies have mostly focused on financial performance instead of efficiency and they also differ on the direction of the relationship between the two variables. The difference in findings among the scholars might arise from methodological differences and operationalization of the study variables. Contextual differences might also explain the inconsistent findings as most of the studies have focused on commercial banks and in different economies. Future studies should investigate underlying variables that can explain the relationship between credit risk management and efficiency of SACCOs.

     

    Keywords: Credit risk management, efficiency, SACCOs.