Effect of Client Appraisal and Loan Monitoring Strategies on the Repayment of Revolving Funds in Kenya

Abstract

A revolving fund is generally setup in small amounts with an appropriation of seed money from the general fund which must exhibit the self-sustaining capacity. The Kenyan Government initiated the Youth Enterprise Development Fund in 2006 as a strategy of addressing youth unemployment. The Women Enterprise Fund on the other hand, was formed as a proactive government response to the dire challenges facing women of Kenya. Despite the importance of revolving funds in Kenya and developing economies, the repayment rate has been relatively low. This study examined the effect of client appraisal and loan monitoring strategies on the repayment of revolving funds in Kenya. The study focused on the government revolving funds in Kenya that were disbursed from 2010 to 2019, and it was carried out within 18 months from January 2020 to June 2021. The target population was the Youth officers in the constituencies and WEF Officers in the 47 counties. The study utilized a correlational research design, and a purposive sampling approach. Data was collected using questionnaires, and analyzed using SPSS version 23. The study established that business assessment visits had a positive and significant effect on the repayment performance of revolving funds (coefficient 5.473, P-000), frequency of training before disbursement had a positive and significant effect on repayment performance of revolving funds, (coefficient 2.715, P-0.002), and the type of training offered before disbursement had a positive and significant effect on repayment performance (coefficient 7.548, P000). On the other hand, that the number of monitoring visits had a positive and significant effect on repayment performance of revolving funds in Kenya, (coefficient 2.327, P-0.023). Also, the number of arrears report had a positive and significant effect on repayment performance of revolving funds in Kenya, (coefficient 2.842, P-0.02). The study concluded that there exists a strong positive relationship between client appraisal strategies and repayment performance of revolving funds in Kenya, while loan monitoring strategies had a significant positive effect on repayment performance of revolving funds in Kenya.