Lending Terms and Profitability of Savings and Credit Cooperatives in Uganda :

Abstract

This study sought to fill the existing knowledge gap between credit terms, credit standards, collection procedures, and profitability of savings and credit cooperative organizations (SACCOs) in Mbarara City southwestern Uganda. In Uganda, credit management became widely adopted by SACCOs to mitigate loan defaults and improve SACCOs’ profitability. A cross-sectional research design with a quantitative approach was used in collecting data from SACCO's staff in Mbarara city. Participants were randomly selected and subjected to questionnaires. The data was coded, edited, and entered into SPSS version 23 for analysis. Descriptive statistics were presented using percentages, mean, and standard deviations. Correlations were used to determine the strength of relationships between lending terms and profitability. The present study found that there is a strong positive correlation between credit terms and profitability of SACCOs (r= .723; p<0.05), collection procedures and profitability of SACCOs (r= .762**; p<0.05), and a weak positive correlation between credit standards and financial performance of SACCOs (r= .244**; p<0.05). The study findings revealed a significant correlation between lending terms and SACCO profitability, suggesting that regulated SACCOs should adopt and implement lending terms strategies to boost profitability.