Role of Credit Risk Management Practices in Sustainability of Micro Credit Schemes in Nakuru County

Analyzing how credit risk management affects the sustainability of microcredit schemes

This paper seeks to assess credit risk management practices and their effects on financial sustainability of microcredit schemes in groups where members save and lend among themselves. The study was conducted in Nakuru County in Kenya using a descriptive survey research design. The sampling frame was drawn from the registrar of societies in the area and the sample size included 95 treasurers of microcredit schemes from the county. Structured questionnaires were used to obtain data from these treasurers and descriptive and inferential statistics were used for analysis of the data. The paper finds that majority of surveyed microcredit groups were keen on ensuring proper credit management practices. Moreover, credit risk management was established to significantly, positively, and strongly affect sustainability of microcredit schemes. The paper covers the following sections in detail:

  • Discussion on microcredit and the various risks faced by microcredit providers;
  • Scope of the study with a focus on objective, research question, and conceptual framework;
  • Review of relevant theoretical and empirical literature;
  • Research methodology with a discussion on the relationship between credit risk management and financial sustainability;
  • Summarization of results and recommendations for start-up microcredit schemes.

About this Publication

By Mwaura, A.N. , Wanyoike, D.M.