Influence of Credit Risk on SACCOS’ Performance on Mainland Tanzania and Implications for TEWW SACCOS Ltd

Abstract

This paper reports the findings of a study that explored the influence of credit risk on SACCOS’ performance on Mainland Tanzania and attendant implications for TEWW SACCOS LTD. Specifically, the study had investigated relationship between the non-performing loan over total loan ratio (NPL/TL) and Return on Assets (ROA) among SACCOS. Second, it set out to determine the relationship between the Total loan over total deposits ratio (TL/TD) and (ROA) among SACCOS. Finally, it compared the influence of the two afore mentioned specific objectives among SACCOS. The study population comprised all SACCOS on Mainland Tanzania. A systematic random sampling was employed to select a sample of 15 SACCOS from Dar es Salaam, Arusha, Dodoma, Mwanza and Tanga regions. Both qualitative and quantitative research approaches were applied in data collection. Analysis of Moment Structure, simple regression analysis and descriptive statistics were used in analysis. The findings indicate that (NPL/TL) had a strong negative (-0.89) and significant influence with the ROA at p=0.001. In fact, when NPL/TL was significantly lower, the ROA on average stood at 45.7 percent. Moreover, there is a positive relationship (+0.91, influence) between (TL/ TD) and (ROA) and significant at P<0.001. These results imply that loan recipients used to deposit more in their savings accounts but failed to repay the loan. Thus, TEWW SACCOS LTD should be prepared to improvise a special grant mechanism for bad loan provisions or creating discounting sort of mechanism to facilitate the loan repayment before loan crisis.