SAMUEL KIIRU KIHUMBA

The role played by SACCOs in the financial industry in Kenya is very crucial. SACCOs help members to save their money and they also provide credit services to those members who are interested. Comparing  the  lending conditions  of  SACCOs  and  other financial  institutions, those of SACCOs are the most  lenient, The  main reason is that unlike banks that require  one to provide  collateral before  they can access the credit facilities, SACCOs just  require  one to be guaranteed  by other members  of the SACCOs Usually three, before the borrower is given the loan, Because  of their leniency, SACCOs  are faced  with a high risk of defaulting despite even  having guarantors. The only option that is left for the SACCOs is to follow the individuals who had acted as the guarantors for the arrears that are yet to be paid. Because of this problem, SACCOs could become skeptical in providing credit facilities. In addition, it could lead to bad blood among the members when one of them defaults the loan and the burden of paying the loan is shifted to the individual who acted as the guarantors. The study specifically sought to determine the effect of client appraisal, credit risk control, collection policy and terms of credit on profitability of SACCOs in Nairobi County, Kenya. To answer study objective descriptive research design was adopted. The study targeted deposit taking SACCOs that operated in Kenya. As at April 2007 there were 186 deposit taking SACCOS that had operations in the country.  The study used purposive sampling to select a sample 42 SACCOs. Primary data collected using questionnaire was used; the   study also used secondary data that was collected from bank financial statements for a period of 5years from 2013 to 2017, Data collected was analyzed using SPSS   version 21.0. The study computed   multiple linear regression models. The study also found that: client appraisal, credit risk control, collection policy and terms of credit significantly and positively related with profitability of SACCOs.  Recommendations   provided were for SACCOs to improve their methods for client appraisals; this will guide them in reducing   number   of credit- unworthy clients who would result in loan delinquency. SACCOs should improve the way they deal with risk accruing from credit through improvement of credit risk control.  SACCOs need to include customers more when coming up with terms of credit; this is because they are the people on the ground and understand   better on. What terms should be applied.  Policy makers and Kenya's regulatory authority need to come up with effective, prudent guidelines as well as polices 'to enhance management of credit risk.