Effectiveness of Security on Loan Recovery in Saccos

Topics: Debt, Loan, Cooperative Pages: 37 (8390 words) Published: September 12, 2011
EFFECTIVENESS OF SECURITY ON LOAN RECOVERY IN SACCOs

(A CASE STUDY OF MHASIBU SACCO)

BY

ANDREW TALAM

BBM/9058/2009.

A RESEARCH PROJECT PROPOSAL SUBMITTED TO MOI UNIVERSITY IN PARTIAL FULFILMENT OF REQUIREMENTS OF A BACHELOR DEGREE IN BUSINESS MANAGEMENT, FINANCE & BANKING

APRIL, 2011

DECLARATION

THIS PROJECT IS MY RESEARCH WORK AND HAS NOT BEEN PRESENTED FOR AWARD OF ANY DEGREE IN OTHER UNIVERSITIES

------------------------------------------------------------------- ANDREW TALLAMDATE

THIS RESEARCH PROJECT HAS BEEN SUBMITTED FOR EXAMINATION FOR MY APPROVALE BY MY UNIVERSITY SUPERVISOR.

--------------------------------..............................................

MR JULIUS DATE

ABSTRACT

There are about 5,000 sacco societies in Kenya which by December 2007, had mobilized Kshs 200 billion representing about 31 percent of the country’s savings or 1/3 of the country’s GPD. MHASIBU SACCO SOCIETY Ltd is situated in Nairobi and established in 1974. It is one of the largest SACCO Societies in the country. Mhasibu Sacco has a branch in Major cities in the country. Its objective is to mobilize savings and grant loans to members. By December 2007, Mhasibu Sacco Society Ltd had mobilized Kshs 8.8 Billion, which is equivalent to 4.4% of all Sacco Savings in the country. By then the outstanding loans stood at Kshs. 8.2 Billion out of which about Kshs 23.5 Million was delinquent. The securities for the loans are loanees expected future income and guarantors.

Granted, that Sacco Societies mobilize large amounts of Savings and consequently give huge loans on the premise that the latter will be paid promptly, a mechanism of compelling loanees to pay such loans from other sources of income in absence of employment income is lacking. Further the retirement benefits authority (RBA) prohibits the use of a loanees’s pension in clearing the loan liability. Given the magnitude of funds lent out, there is need to examine factors that influence the effectiveness of security in loan repayment.

TABLE OF CONTENTS

DECLARATIONii
ABSTRACTiii
CHAPTER ONE1
1.0 INTRODUCTION1
1.2 STATEMENT OF THE PROBLEM3
1.3 THE STUDY OBJECTIVES4
1.4 RESEARCH QUESTIONS5
1.5 JUSTIFICATION OF THE STUDY5
1.6 SIGNIFICANCE OF THE STUDY5
1.7 LIMITATION OF STUDY6
1.8 ASSUMPTIONS OF THE STUDY6
1.9 SCOPE OF THE STUDY6
CHAPTER TWO8
2.0LITERATURE REVIEW8
2.1 INTRODUCTION8
2.2 CONCEPTUAL FRAMEWORK9
2.3 SAVINGS11
2.4CREDIT GRANTING11
2.5 GUARANTORSHIP11
2.6DEFAULT IN LOAN REPAYMENT13
2.7REVIEW OF PAST STUDIES DONE IN THE AREA14
2.8 REVIEW OF MAJOR ISSUES15
2.9 GAPS TO BE FILLED BY THE STUDY16
CHAPTER THREE17
3.0 RESEARCH METHODOLOGY17
3.1 INTRODUCTION ...............................................................................................17
3.2RESEARCH DESIGN17
3.3 POPULATION17
3.4 SAMPLING DESIGN18
3.5DATA COLLECTION PROCEDURES18
3.6 DATA ANALYSIS18
REFERENCES20
APPENDIXES ..................................................................................................................22

CHAPTER ONE

1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY

The ultimate goal of every nation is uplifting the living standards of its people. Countries all over the world have tried to achieve this goal either by directly involving themselves in activities that lead to improvement of welfare or by creating the infrastructure that encourages the people to be involved in programmes that lead to improvement of their standard of living..

Disparities in natural resource endowment coupled with the effectiveness of development policies adopted by respective countries have contributed to social and economic strata...

References: Atieno R., 2001, formal and Informal Institutions’ lending policies and access to credit by small-scale enterprises in Kenya: An empirical assessment. AERC Research Paper 111, Nairobi, Kenya.
Kothari, 2004. Research methodology. Methods and techniques. New Age International (P ) Ltd, New Delhi, India.
Ouma J. S, 1990, The transformation of the informal sector. The co-operative perspective. Shirikon Press, Nairobi.
Oswaldo C. P. 2001. National Survery of Credit Unions Ecuador. WOCCU Inc.
Ademba C. 2008, The SACCO Societies regulatory bill 2008. African SACCO Technical Conference. The Gambia.

Omweri L, 1998

Steams K, 1991, Methods for Managing delinquency
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