objective of this paper was to conduct
literature review on how credit risk management impacts efficiency and
to identify the knowledge gaps in the relationship between the two variables.
This study will help the government in policy direction as far as growing the
financial sector as a precursor to credit risk management and its contribution
to growth in terms of improved savings, improved per capita income, improved
credit to private sector and increased employment levels both directly and
indirectly. From the empirical studies reviewed, credit risk management was
found to influence financial performance but there is no concrete evidence on
the relation that credit risk management has with efficiency of SACCOs. The
previous studies have mostly focused on financial performance instead of
efficiency and they also differ on the direction of the relationship between
the two variables. The difference in findings among the scholars might arise
from methodological differences and operationalization of the study variables.
Contextual differences might also explain the inconsistent findings as most of
the studies have focused on commercial banks and in different economies. Future
studies should investigate underlying variables that can explain the
relationship between credit risk management and efficiency of SACCOs.
Keywords: Credit risk
management, efficiency, SACCOs.