EFFECT OF RISK MANAGEMENT STRATEGIES ON PERFORMANCE OF SAVING AND CREDIT COOPERATIVES IN RWANDA. A CASE STUDY OF UMURENGE SACCOs IN GISAGARA DISTRICT
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Abstract
This study aimed to explore the risk management strategies and performance of Saving and Credit Cooperatives in Rwanda. The specific objectives of the study were to evaluate the risk management strategies adopted by UMURENGE SACCOs in Gisagara District, to assess the performance of UMURENGE SACCOs in Gisagara District, and to examine the relationship between risk management strategies and the performance of UMURENGE SACCOs in Gisagara District. A mixed-method approach, incorporating both quantitative and qualitative methods, was used to collect and analyse data, along with descriptive and correlational research designs. The sample size consisted of 86 individuals, and data were collected using questionnaires and interview guides. Descriptive statistics and inferential statistics were used to analyse the data. Findings indicate mean score of 4.26 show that there is presence of a well-defined credit risk policy. Liquidity risk management is also robust, with mean score of 4.39 confirming sufficient liquid assets. Regression analysis shows that risk management strategies explain 96.7% of the variation in SACCOs performance (Adjusted R² = 0.967). The non-performing loan (NPL) ratio stands at 4.8%, below the regulatory threshold of 5%, indicating effective credit risk management. The liquidity coverage ratio (LCR) is 132%, demonstrating strong liquidity reserves. Furthermore, the return on assets (ROA) ratio is 6.2%, reflecting profitability linked to effective risk management. Credit risk management exhibits a strong correlation with performance (r = 0.65, p = 0.002), while operational risk management has the highest impact (r = 0.70, p = 0.001). ANOVA results confirm the model’s significance (F = 580.493, p < 0.000). Regression coefficients highlight that credit risk management (B = 0.915, p < 0.001) has the strongest effect, followed by operational risk management (B = 0.280, p < 0.001). These findings emphasize the necessity of sound risk management strategies to enhance SACCOs’ financial sustainability. UMURENGE SACCOs in Gisagara District’s continued success is tightly linked to its ability to manage various financial and operational risks, providing a solid foundation for future growth. The study recommends that UMURENGE SACCOS IN GISAGARA DISTRICT should strengthen contingency planning for liquidity risks and enhance market risk policies to further bolster financial stability. Additionally, continuous improvement in customer service and operational efficiency will solidify its competitive position.
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