Abstract:
The general objective of the study was to establish the determinants of the level of Bad
debts of Deposit Taking SACCO’s in Nairobi County. Specific aims of the research were:
to assess the level of Bad debts of deposit taking SACCO’s in Nairobi County, to assess
the moral hazard related determinants of bad debts in Deposit Taking SACCOs in Nairobi
County, to assess the adverse selection related determinants of bad debts in DT SACCOs
in Nairobi County, to determine the moderating effect of DT SACCO size on the
relationship between moral hazard and adverse selection determinant and level of bad
debts in DT SACCOs in Nairobi County. The study was anchored by the information
asymmetry theory and the Keynes liquidity preference theory. An extensive empirical
review was also carried out. The researcher used a descriptive cross-sectional research
design in highlighting the determinants of the level of Bad debts of SACCOs in Nairobi
County. Census technique which involves studying the entire population was used in the
study. All the 43deposit taking SACCOs licensed by SASRA were selected as sampling
units. After required data had been acquired the; coding, editing and tabulation were
done. Data was analyzed using quantitative techniques guided by SPSS version 24,
system of analysis. The analyzed data was then presented in form of charts, graphs and
tables. Regression was applied in the analysis of the determinants of the level of bad debts
in deposit taking SACCO’s in Kenya. The results revealed that adverse selection related
determinants and level of bad debts have a significant and positive relationship. In
addition, the results reflected that moral hazard related determinants and level of bad
debts have a significant and positive relationship. The study recommends that SACCOs
should employ qualified staff who will be able to access borrowers who are credit worth.
In addition the SACCOs should train their staff on how to access their borrowers on their
credit worthiness. This will help the SACCOs in the reduction of level of bad debts. The
SACCOs should also discourage their borrowers from diverting their loans from its
original use that they have agreed. This can be done by making follow up of the
borrowers and how they are using the loans. This will minimize the amount of bad debts
in the deposit taking SACCOs.
