EFFECT OF CONSUMER PROTECTION FUNCTION ON FINANCIAL PERFORMANCE OF SACCOS IN KENYA
DOI:
https://doi.org/10.47604/ijfa.145Keywords:
Consumer protection, lender, Credit Reference Bureaus, information sharing, defaulters, financial performance, SACCOsAbstract
Purpose: The study sought to determine the effect of consumer protection function on financial performance of SACCOs in Kenya.
Methodology: The study adopted a descriptive research design. The target population comprised of registered 181 deposit-taking SACCOs as at 31st December 2014 and the three licensed CRBs in Kenya. Stratified random sampling was used in the study, where SACCOs were grouped into five respective strata which were then randomly selected. The SACCOs were grouped into five respective strata of government based, teachers based, farmers based, private institutions based and community based. The study sampled 135 of the 181 (74.5%) licensed deposit taking SACCOs since these were the only licensed deposit-taking SACCOs by 2014. The choice of the licensed deposit taking SACCOs in Kenya was very objective since it was possible to obtain information that is representative of Kenya. In addition, SACCOs form the smaller arm in the financial sector and in most cases deals with a larger group of clients from the informal sector as opposed to other financial institutions like banks. Both primary and secondary data were analyzed using SPSS software, and statistics generated included descriptive statistics and inferential statistics. The particular descriptive statistics used included frequencies and percentages while the particular inferential statistics included Pearson correlation analysis and regression. Correlation analysis was used to establish relationships between the consumer protection function and financial performances. Regression analysis was used to establish the significance of the variables and the degree of causal effect of the independent variables on the dependent variable. The hypotheses testing were conducted using simple regression model.
Findings: From the data analysis the study concluded that there was a significant and positive relationship between consumer protection function and financial performance thus the existence of credit reference bureaus was suitable for improving financial performance of SACCOs. This implies that that Credit reference bureaus have led to consumer protection and increased customers' rights. Similarly, credit reference bureaus have led to assumption that borrowing is a right regardless of capabilities. Credit reference bureaus have reduces undesired monopolistic actions of lenders. Lastly, credit reference bureaus have led to reduced bad "culture" on loan repayment.
Recommendation: The study recommended that lenders should ensure that they have accurate information before listing the unworthy borrowers to avoid unnecessary legal battles which may affect performance as a measure for customer rights protection.
Downloads
References
Alloyo, P. T. (2013). The Effect of Credit Reference Bureaus on the Financial Performance of Commercial Banks in Kenya. Nairobi: University of Nairobi.
Bercoff, J., Giovanni, G., & Grimard, F. (2012). Argentinean Banks, Credit Growth and the Tequila Crisis: A Duration Analysis. Sau Paulo: Central Bank of Argentina.
Boyd, J. H., & Hakenes, H. (2013). A Theory of Creditor Rights, Information Sharing and Bank Risk Taking. University of Bonn and MPI Bonn. Minnesota: Carlson School of Management.
CBK. (2012). Update on the Credit Information Sharing Project, Nairobi. Retrieved September 26, 2015, from Central Bank of Kenya: http://www.centralbank.go.ke.
CBK. (2013). Bank Supervision Annual Report 2013. Nairobi: Central Bank of Kenya.
Chakazamba, L., Matanda, E., & Dube, H. (2013). The Impackt of Credit Bureaus on the Performance of Zimbabwean Financial Institutions. Journal of International Academic Research for Multi Disciplinary , I (10), 3-15.
Djankov, S., McLeish, C., & Shleifer, A. (2007). Private Credit in 129 Countries. Journal of Financial Economics , 84 (2), 299-329.
Gaitho, N. W. (2013). Role of Credit Reference Bureaus on Credit Access in Kenya: A survey of Commercial Banks in Kenya. European Scientific Journal , IX (13), 1-14.
Kioko, C. (2014). Credit Information Sharing Influence on Performance of Licensed Deposit Taking Sacco Businesses in Kenya. The Strategic Journal Of Business & Change Management , II (39), 1-18.
Kwambai, D., & Wandera, M. (2013). Effects of Credit Information on Non-Performing Loans: The Case of Kenya Commercial Bank. European Scientific Journal , IX (13), 168-193.
Lin, C., Ma, Y., & Song, F. (2012). What Drives Bank Operating Efficiency? The Role of Bank Competition and Credit Information Sharing. Research Handbook on International Governance , 87.
Marcucci, J., & Quagliariello, M. (2011). Is Bank Portfolio Risk Procyclical? Evidence from Italy Using a Vector Auto Regression. Journal of International Financial Markets, Institutions and Money , 18, 46-63.
SASRA. (2012). SACCO Societies Regulatory Authority. Nairobi: Government Printers.
SASRA. (2014). SACCO Societies Regulatory Authority. Nairobi: Government Printer.
Segita, M. A., Limo, C., Kibati, P., & Muhanji, S. (2014). Asymmetry of Informatin on Credit Reference Bureaus for Bank Customers in Kenya: A case Study of Nakuru Town. Nakuru: Kabarak University.
Siwela, M. (2011). The Development of the Credit Reference System of Zambia. Lusaka: University of Zambia.
Downloads
Published
How to Cite
Issue
Section
License
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
