The Effects of Credit Terms on Loan Performance of SACCOS in Mbarara City

Abstract

The study was carried out on the effects of credit terms on loan performance of savings and credit cooperatives (SACCOs) in Uganda: A case study of selected SACCOs in Mbarara City. The study adopted both a Case study and cross-sectional research designs with a population size of 429 consisting of directors, managers and employees. The total sample size was 207. The study used simple random to select both employees and board members while purposive sampling used to select managers. Questionnaires were administered to 189 both employees and board members while 18 SACCO managers were interviewed. Data was analysed both quantitatively using SPSS 20 and qualitative approach thematically. The study found out that Credit management (credit terms, client appraisal have a high significant effect on loan performance of SACCOs in Mbarara City. However, credit risk control as credit management practice has a low significant effect on loan performance. The study recommends that SACCOs in Mbarara City should employ credit management practices like loan insurance, monitoring system of clients in their SACCOs, clear policy of joint liability between clients and SACCOs, independent risk screening teams to assess clients, and restructuring some loans for struggling clients before selling off their collaterals in order to reduce on the rate of non-performing loans thus increasing their loan performance. Key words: Credit terms, Loan Performance