Institutional Determinants of Credit Control in Savings and Credit Co-operative Societies in Nyandarua County, Kenya

Abstract

Savings and Credit Co-operative Societies (SACCOs) do play a key role in Kenya’s financial and socio-economic development. This role is critical in rural areas with limited access to formal banking, such as Nyandarua County. Despite this, many SACCOs have weaknesses in credit control, as evidenced by high loan defaults and non-performing loans. The outcome is poor liquidity and diminished members’ confidence. Effective credit control is essential for ensuring efficient loan recovery and the sustainable financial health of SACCOs. It is against this background that this study examined the determinants of credit control in SACCOs within Nyandarua County. It focused on four key factors: credit risk management strategies, loan recovery strategies, staff competence, and credit policies. It was anchored on Credit Risk Theory, Loan Recovery Model, Information Asymmetry Theory, and Institutional Theory. These theories collectively explain how risk assessment, recovery mechanisms, information structures, and institutional norms shape credit outcomes. It was a descriptive cross-sectional research study that targeted a population of 416 officials from the 104 active SACCOs in Nyandarua County. A stratified random sample of 204 respondents was drawn, made up of Credit Officers and Credit Committee Members. Both quantitative and qualitative data was gathered using semi-structured questionnaires. Content validity was ensured through expert review, while reliability was assessed using a test-retest pre-test. A Cronbach’s Alpha, with a preset threshold of 0.7, was attained on all variables. Descriptive statistics, correlation, and multiple regression analysis techniques were used for quantitative data, supported by the Statistical Package for the Social Sciences (SPSS) Version 24. Qualitative thematic analysis complemented the interpretation. Correlation analysis revealed that institutional determinants significantly influence credit control outcomes. Loan recovery strategies demonstrated the strongest positive relationship, while credit risk frameworks and policies showed moderate effects, underscoring their importance. Staff competencies, however, showed a weak, non-significant association, suggesting an indirect impact that depends on complementary institutional mechanisms. Regression analysis revealed that institutional determinants collectively shape SACCO credit control, with loan recovery strategies and staff competencies exerting the strongest positive influence, credit risk frameworks contributing significantly, and rigid credit policies constraining effectiveness, underscoring the need for flexible governance and robust recovery mechanisms. The findings provide context-specific insights to strengthen credit control practices in rural SACCOs. The results could inform policymakers, regulators, and SACCO managers on strategies to enhance credit governance, improve portfolio quality, reinforce financial sustainability, and promote inclusive rural economic development in Nyandarua County and similar contexts.