Analysis of Member Quality and Portfolio Quality in Deposit-Taking SACCOs in Kenya: Positivism Paradigm Approach

Deposit-Taking SACCOs have been actively recruiting and expanding financial services to promote financial inclusion, reaching out to all segments of society, especially the underserved populations, particularly those marginalized in rural areas. However, during membership recruitment, traits such as loyalty, profitability, engagement, and advocacy set high-quality members apart. These traits play pivotal roles in driving business growth, building brand reputation, and ensuring long-term sustainability. During the loan appraisal and approval process, customer characteristics and their perceived value carry significant weight. Therefore, evaluating member quality in terms of creditworthiness, financial literacy, and the ability to make timely payments stands as the central activity in the loan appraisal and approval process. Nevertheless, the empirical studies that were reviewed have presented diverse findings on this subject. The present study, therefore, investigated the effect of member quality on portfolio quality in deposit-taking SACCOs in Kenya. The study used primary data, and structured and unstructured questionnaires were administered to purposely selected credit managers in deposit-taking SACCOs in Kenya. Results of the study revealed that member quality positively and significantly influences the portfolio quality of DT SACCOs in Kenya (p =0.000<0.05) and R2= 31.9%. These results are essential to SACCO managers, SACCO regulators like SASRA, scholars, and policymakers like the government.