Credit risk management practices of savings and credit cooperative societies: a case of Uganda Revenue Authority SACCO

Abstract

The study explored the effectiveness of the Credit risk management practices in the URA SACCO. The objectives of the study were: to analyse and assess the effectiveness of the credit risk management practices, establish the challenges encountered in implementing the credit risk management practices in SACCOs and the suggestions for improvement of these credit risk management practices in SACCOs in Uganda.

The study adopted a qualitative research design which was cross sectional and descriptive in nature. The target population was the URA SACCO management and the sample size was five participants who were selected purposively. Both primary and secondary sources of data were utilised in the study. A structured interview guide was used to collect primary data. Data was analysed using descriptive and content analysis techniques. The study also followed Ethical considerations and ensured trustworthiness.

The findings revealed that following the debt collection policy, adherence to security policies in place such as; insurance of 1% on loans, members’ savings, members’ shares, and also signing the memorandum of association with URA in case of default, extension of loans to confirmed staff and use of guarantors before loans are extended to clients (these guarantors should be SACCO members) are best credit risk management practices. The main perceived challenges included: the few staff, non-repayment of loans and use of manual system. In order to improve on the credit risk management practices, the study recommended increasing the number of staff, automating the system and a review of the credit policy.