Influence of Repayment Period on Choice of Loan Packages by Sacco Members in Kakamega Central Sub County, Kenya

Abstract: This study examined the influence of repayment period on loan package choices among SACCO members in Kakamega Central Sub-County, Kenya, addressing the challenge where members struggle to access loans despite substantial deposits due to repayment constraints. The objective was to determine how repayment period influences loan package selection, guided by Agency Theory which explains the relationship between SACCO management and members in setting loan terms. Using a descriptive survey design, data was collected from 374 respondents selected from a population of 9,758 SACCO members through structured questionnaires out of which 346 questionnaires were filled and returned. Regression analysis revealed that repayment period significantly influences loan package choice (R²=0.232, β=0.482, p=0.004), explaining 23.2% of variation in selection. The study concluded that members favor loan packages with repayment terms aligned to their income patterns and loan purposes, with 44.5% preferring development loans offering 36-48 month terms. Key recommendations include implementing flexible repayment options, aligning periods with member income patterns, and considering loan purpose when setting terms.

Repayment Period, Loan Packages, SACCOs, Agency Theory, Kakamega

1. Abdullah, H., & Valentine, B. (2009). Fundamental and ethics theories of corporate governance. Middle Eastern Finance and Economics, 4(4), 88-96. [Google Scholar] [Crossref]

2. Adebayo, M., & Oluwole, K. (2020). Loan package selection and cooperative performance in Nigeria. Journal of Cooperative Studies, 15(3), 45-62. [Google Scholar] [Crossref]

3. Adebayo, M., Johnson, L., & Okonkwo, P. (2018). Determinants of loan package preferences in Nigerian credit unions. African Journal of Microfinance, 7(2), 112-134. [Google Scholar] [Crossref]

4. Bhimani, A. (2008). Making corporate governance count: The fusion of ethics and economic rationality. Journal of Management and Governance, 12(2), 135-147. [Google Scholar] [Crossref]

5. Chege, A. (2006). An investigation in determinants of loan default within the Banking industry in Kenya. A case study of HFCK [MBA thesis, Moi University]. [Google Scholar] [Crossref]

6. Dutta, S., & Reichelstein, S. (1999). Asset valuation and performance measurement in a dynamic agency setting. Review of Accounting Studies, 4(2), 235-258. [Google Scholar] [Crossref]

7. Harrell, A., & Harrison, P. (2018). An incentive to shirk, privately held information, and managers' project evaluation decisions. Accounting, Organizations and Society, 43(3), 147-166. [Google Scholar] [Crossref]

8. Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. [Google Scholar] [Crossref]

9. Johnson, K., & Peterson, M. (2019). Financial inclusion through credit union membership: Patterns and determinants. Journal of Consumer Affairs, 53(3), 1121-1145. [Google Scholar] [Crossref]

10. Karanja, J. (2019). SACCO loan product design and member retention in Kenya. East African Journal of Business and Economics, 5(2), 78-93. [Google Scholar] [Crossref]

11. Kariuki, J., & Ngugi, P. (2020). Influence of Loan Repayment Terms on Loan Uptake in Savings and Credit Cooperative Societies in Kenya. International Journal of Finance and Banking Studies, 9(3), 45-60. [Google Scholar] [Crossref]

12. Khalayi, J., Ondiek, A., & Musiega, D. (2019). Effect of interest rates on deposits mobilization among SACCO members in Kakamega County. International Journal of Business and Management Invention, 8(5), 28-41. [Google Scholar] [Crossref]

13. Kimani, P., & Mutuku, L. (2021). Challenges in SACCO loan accessibility in Kenya: A multi-county analysis. Journal of Cooperative Management, 12(3), 156-172. [Google Scholar] [Crossref]

14. Kinya, D., Shavulimo, P., Chepkoech, L., & Langat, P. (2015). Effect of loan terms and conditions on loan volume granted by selected deposit taking SACCOs in Nyeri County, Kenya. IOSR Journal of Business and Management, 17(2), 55-64. [Google Scholar] [Crossref]

15. Kinyua, J., Amuhaya, I., & Namusonge, G. (2015). Influence of loan terms on financial performance of deposit taking SACCOs in Kiambu County, Kenya. International Journal of Economics, Commerce and Management, 3(10), 780-795. [Google Scholar] [Crossref]

16. Kirimi, L., Mwangi, J., & Kariuki, S. (2018). SACCO loan package selection and business growth in Meru County. African Journal of Cooperative Development, 3(2), 67-82. [Google Scholar] [Crossref]

17. KUSCCO Ltd. (2021). SACCO STAR Quarterly Report. Kenya Union of Savings and Credit Cooperatives. [Google Scholar] [Crossref]

18. Mabonga, J. (2021). Loan Product Design and Borrowers’ Uptake in Cooperative Financial Institutions. African Journal of Cooperative Development, 7(1), 112-128. [Google Scholar] [Crossref]

19. Martinez, R., & Rodriguez, E. (2018). Loan package design and default rates in European credit cooperatives. Journal of Financial Services Research, 53(3), 215-231. [Google Scholar] [Crossref]

20. Mensah, K. (2019). SACCO membership retention through appropriate loan offerings in Ghana. West African Journal of Cooperative Studies, 4(2), 45-61. [Google Scholar] [Crossref]

21. Mensah, K., & Adebayo, J. (2021). Impact of loan selection on borrower business performance in African cooperatives. Journal of Development Economics, 142, 102-118. [Google Scholar] [Crossref]

22. Mkumbo, F., & Hassan, A. (2018). Determinants of loan package effectiveness in Tanzanian SACCOs. East African Cooperative Review, 6(1), 35-49. [Google Scholar] [Crossref]

23. Mohammed, H., & Hassan, K. (2019). Loan accessibility in Tanzania's savings and credit cooperatives. African Journal of Cooperative Development, 12(2), 78-95. [Google Scholar] [Crossref]

24. Mutuku, M., & Kagiri, A. (2021). Factors influencing loan uptake in Machakos County SACCOs. East African Journal of Business Management, 5(1), 45-62. [Google Scholar] [Crossref]

25. Mutuku, M., & Kimani, J. (2020). Loan product design and member economic empowerment in Kenya. Journal of Financial Inclusion, 8(3), 123-141. [Google Scholar] [Crossref]

26. Mwangi, P., Karanja, J., & Nyaga, K. (2020). SACCO operational efficiency and loan package structures. Cooperative Finance Journal, 15(2), 112-128. [Google Scholar] [Crossref]

27. Namukasa, J., Mukasa, F., & Kimani, P. (2017). Financial sustainability through appropriate loan structures in Ugandan SACCOs. Journal of African Business, 18(3), 321-337. [Google Scholar] [Crossref]

28. Njeru, D., Njeru, A., & Ondabu, T. (2020). Effect of loan repayment on financial performance on deposit taking SACCOs in Mt Kenya Region. International Journal of Innovation & Applied Studies, 11(5), 150-166. [Google Scholar] [Crossref]

29. Njoroge, K., & Kamau, A. (2021). SACCO sustainability and market competitiveness in Kenya. African Cooperative Journal, 9(1), 78-94. [Google Scholar] [Crossref]

30. Nyaga, J. (2020). Challenges in SACCO loan accessibility: A case study of Central Kenya. Journal of Cooperative Finance, 8(3), 112-128. [Google Scholar] [Crossref]

31. Odhiambo, J. (2019). SACCO default rates and member satisfaction in Nairobi County. Kenyan Journal of Finance, 7(2), 87-101. [Google Scholar] [Crossref]

32. Odhiambo, M., & Wekesa, M. (2020). Loan product design in Western Kenya SACCOs. African Journal of Management Studies, 14(2), 89-106. [Google Scholar] [Crossref]

33. Olando, C., Jagongo A., & Mbewa, M. (2018). The contribution of SACCO financial stewardship to growth of SACCOs in Kenya. International Journal of Humanities and Social Science, 8(3), 112-137. [Google Scholar] [Crossref]

34. Omondi, F., & Muturi, W. (2019). Effect of Loan Repayment Flexibility on Borrowers' Loan Preferences in Microfinance Institutions in Kenya. Journal of Business and Economic Research, 8(2), 78-94. [Google Scholar] [Crossref]

35. Otieno, P., & Awino, Z. (2018). SACCO portfolio performance and economic stability in Kisumu County. Lake Region Economic Review, 6(2), 78-93. [Google Scholar] [Crossref]

36. Patel, K., Singh, R., & Desai, V. (2016). Cooperative banks and loan portfolio quality in rural India. International Journal of Rural Management, 12(1), 96-113. [Google Scholar] [Crossref]

37. Rahman, A., & Singh, H. (2020). Loan selection and economic stability in emerging economies. Journal of Emerging Market Finance, 19(2), 178-196. [Google Scholar] [Crossref]

38. Republic of Kenya. (2016). Kakamega County Cooperative Development Report. Ministry of Industry, Trade and Cooperatives. [Google Scholar] [Crossref]

39. Republic of Kenya. (2018). Annual Economic Survey. Kenya National Bureau of Statistics. [Google Scholar] [Crossref]

40. Roberts, P. (2021). Agency theory in financial cooperatives: Contemporary perspectives. Journal of Cooperative Organization and Management, 9(2), 156-172. [Google Scholar] [Crossref]

41. Ross, S. (1973). The economic theory of agency: The principal's problem. American Economic Review, 63(2), 134-139. [Google Scholar] [Crossref]

42. Santos, P., & Silva, M. (2017). Microfinance lending structures and portfolio performance in Brazil. Latin American Business Review, 18(4), 315-332. [Google Scholar] [Crossref]

43. SASRA. (2021). SACCO Sector Supervision Annual Report. SACCO Societies Regulatory Authority. [Google Scholar] [Crossref]

44. Thompson, R., Wilson, M., & Chang, L. (2019). Credit union lending patterns in developed economies. Journal of Financial Services Research, 24(4), 178-195. [Google Scholar] [Crossref]

45. Wafula, R., & Masinde, J. (2020). SACCO lending patterns in Kakamega County. Journal of African Business Studies, 11(2), 67-84. [Google Scholar] [Crossref]

• Leveraging Pension Assets for Investment in Nigeria's Marginal Oil Fields: A Conceptual Analysis
• The Influence of Green Technology, Environmental Disclosure and Green Intellectual Capital on Stock Returns
• Performance Evaluation of Some Machine Learning Models for Music Genre Classification
• The Impact of Generative Artificial Intelligence on University Information Literacy Education: A Systematic Review from Challenges to Changes
• Development of a Manychat Based Chatbot for Automated Customer Support System