EFFECT OF CREDIT APPRAISAL ON LOAN DEFAULT IN AGRICULTURAL FINANCE CORPORATION
Authors/Creators
- 1. Department of Accounting and Finance, School of Business, Kenyatta University, Kenya
Description
Abstract: The Agricultural Finance Corporation (AFC) has experienced loan defaults totaling Kes.10 billion in the last five years, from 2015 to 2020, against a portfolio of loans amounting to Kes.17 billion. This is in line with the crime rate of 58.8 percent compared to the 12 percent industrial indicator. This type of situation, if not addressed immediately, could lead to the decline of the Agro-financing financial institution over time. The cause of this loan failure has not been determined. The purpose of this study was to determine whether the principles of credit management, especially when debt management and repayment procedures are implemented, would reduce the borrowing burden on Kenya's Agricultural Finance Corporation. The study sought to investigate the effect of credit appraisal on loan default in agricultural finance corporation. A descriptive research design was used for the study. Data was gathered through the use of questionnaires administered by the researcher. The target population was 485 AFC employees, with a sample of 141 employees, particularly department heads from AFC's 47 branches, chosen to complete the questionnaires. Operations, Finance, and Loan Recovery are among these departments. Purposive sampling was used to select the 141 heads. The Statistical Package for Social Sciences (SPSS) version 21 was used to analyze the data. The effect of the study's independent variables on the quantitative dependent variable was determined using a multiple regression model analysis (loan defaulting). Tables and other statistical presentation techniques were used to present descriptive analysis. According to the study, credit appraisal was statistically significant in predicting loan default. According to the findings of the study, credit terms, credit appraisal, credit monitoring and evaluation, and credit review all play a role in predicting loan default. The study recommended that management include significant credit terms that are well communicated in order to protect AFC clients from inflation and rising costs of living. However, management should do so with the understanding that, when used alone, credit terms lack the defaulting contributing potential. As a result, organizations should supplement credit terms with other credit management practices such as pandemics, severe drought, and poor markets for their produce, which the study identifies as long-term factors.
Keywords: Credit Appraisal, Loan Default.
Title: EFFECT OF CREDIT APPRAISAL ON LOAN DEFAULT IN AGRICULTURAL FINANCE CORPORATION
Author: Ibrahimweli Gabow Sheikh, Dr. Nerbert Avutswa
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 10, Issue 1, April 2022 - September 2022
Page No: 333-338
Research Publish Journals
Website: www.researchpublish.com
Published Date: 30-June-2022
DOI: https://doi.org/10.5281/zenodo.6783047
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