DETERMINANTS OF FINANCIAL PERFORMANCE AMONG SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN KAKAMEGA COUNTY KENYA
DOI:
https://doi.org/10.47604/ijfa.583Keywords:
Financial performance, Capital Structure, Asset Quality, Liquidity, Income Diversification and SaccosAbstract
Purpose: The main objective of this study was to investigate determinants of financial performance of Savings and Credit Co-operative Societies in Kakamega County.
Methodology: This study used a descriptive survey design. The target population for this study was 44 SACCOs in Kakamega County. The study used census sampling technique. Secondary data was obtained from Audited Annual Reports of the 44 SACCOs in Kakamega County- Kenya. The data was analyzed using the Statistical Packages for Social Sciences (SPSS). Analysis of the data collected focused on both the descriptive statistics (trends) and inferential statistics (Pearson Correlation Coefficients and multiple regression coefficients. The analyzed data was presented in frequency tables and graphs. Regression analysis was used to establish the relationship between the independent and dependent variables.
Results: The study findings revealed that liquidity and return on equity were positively and significantly related, results further indicate that capital structure and return on equity were positively and significantly related. It was further established that assets quality was negatively and significantly related to return on equity. Similarly, results showed that income diversification was positively and significantly related to return on equity
Policy recommendation: The study recommends that all SACCO's managers should be trained on the deployment of efficient systems to strengthen liquidity risk control fundamentals, that SACCOs should capitalize on efficient mobilization of members' savings and borrow less, unless they get cheap sources of external funds such as soft loans, that the Saccos should improve their investment assets levels and improve assets quality by reducing the rate of nonperforming loans through credit risk identification.
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References
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Ademba, C. (2010, October 5). Challenges facing SACCO regulations in Africa. Paper presented at the 11th SACCA Congress, Swaziland. Retrieved May 9, 2014 from African Confederation of Cooperative Savings & Credit Associations Website, http://www.accosca.org
Aisha, I., Rahila, H., Sadaf, C. and Nisar, A. (2015). Income-diversification in banking sector of Pakistan The Journal of Commerce Vol.7, No.1, pp.11-22
Alhassan, A.L., (2015). Income diversification and bank efficiency in an emerging market. Management. Finance 41, 1318-1335.
Amalendu B, Somnath M and Gautam R (2011).Financial Performance Analysis-A Case Study; Current Research Journal of Social Sciences. Vol 3, PP. 269-275
Banerjee, S., &Velamuri, M., (2015). The conundrum of profitability versus soundness for banks by ownership type: evidence from the Indian banking sector. Rev. Financial Econ.26, 12-24.
Basel Committee on Banking Supervision. (2013).Basel III: The Liquidity Coverage Ratio and Liquidity risk monitoring tools. Bank of International Settlements
CBK Prudential Guideline (2013). Prudential-Guidelines https://www.centralbank.go.ke/wp-content/uploads
Chang, W.S., & Hsieh, J.J. (2011). Intellectual capital and value creation is innovation capital missing link? International Journal of Business and Management 6(2): 1-12.
Daft, R. L., Murphy, J., &Willmott, H. (2011).Organization theory and design. Hampshire,UK: South-Western.
Davis, J.H., Schoorman, F.D. & Donaldson, L. (1997).Toward a stewardship theory of management.Academy of Management Review, 22: 20-47
Donaldson, L. & Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16, 49-64.
Elsas, R., Hackethal, A., &Holzhäuser, M., (2010). The anatomy of bank diversification. J.Bank. Finance 34, 1274-1287.
Emery, G.W.(2013). A pure financial explanation for trade credit. Journal of financial and quantitative Analysis
Gruian,C.M.(2010). What do we mean by "company performance"? Annals - Economy Series, vol. 4.I, 243-255
Houghton, J. D. (2010). Does Max Weber's notion of authority still hold in the Twenty first century? Journal of Management History, 16(4), 449 - 453.
Jane J. B., Muturi, W., Kibati,P., Koima,J.(2017. Effect of Asset Quality On The Financial Performance Of Savings And Credit Societies in Kenya American Journal of Finance. Vol 1, No 4
Janglani S. & Sandhar S.K. (2013). A Study on Liquidity and Profitability of Selected Indian Cement Companies: A Regression Modeling Approach. International Journal of Economics, Commerce and Management United Kingdom, 1 (1), 1-24.
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Karagu J.M. & Okibo, B. (2014). Financial Factors Influencing Performance of Savings and Credit Cooperative Societies in Kenya, 4(2) 291-302, http:// doi.org//10.6007/IRAFMS/V4-I2/892
Kariuki, B.N. (2014). The relationship between dividend and financial performance of saving and Credit Cooperative Societies registered by SACCO Society Regulatory Authority in Nairobi County. Unpublished MBA Project, University of Nairobi.
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Mumanyi, E. A. L. (2014). Challenges and opportunities facing SACCOs in the current devolved system of government of Kenya: A case study of Mombasa County. International Journal of Social Sciences and Entrepreneurship, 1 (9), 288-314.
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Ngui, A. N. (2010). A survey of the use of financial performance indicators by SACCOS in Kenya, An unpublished MBA Thesis, University of Nairobi
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Olagunju, A., David, A. O., & Samuel, O. O. (2012). Liquidity Management and Commercial Banks' Profitability in Nigeria. Research Journal of Finance and Accounting, 2(7-8), 24-38.
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Olweny, T. & Shipho, T. (2011). Effects of Banking Sect oral factors on the profitability of Commercial Banks in Kenya. Economics and Finance Review, 1(5), 1-30.
Ongore, V.O. &Kusa, G.B. (2013).Determinants of Financial Performance of Commercial Banks in Kenya.International Journal of Economics and Financial Issues, 3(1), 237-252.
Otieno,K.(2016). Growth strategies and transformational orientation adopted by Unaitas Sacco in Kenya. An unpublished MBA Thesis, University of Nairobi
Pandey, I. M. (2010). Financial Management ." Vikas Publishing House (PVT) Ltd, New Delhi
Pennathur, A.K., Subrahmanyam, V., &Vishwasrao, S., (2012). Income diversification and risk:does ownership matter? An empirical examination of Indian banks. J. Bank. Finance 36, 2203-2215.
Pryor, M. G., &Taneja, S. (2010). Henry Fayol, practitioner and theoretician- revered and reviled. Journal of Management History, 16(4), 489-503
Robert, O. (2013) Effect Of Capital Structure On Financial Performance Of Firms Listed At The Nairobi Securities Exchange. Unpublished Nairobi university thesis
Rogers, E.M. (2010). Diffusion of Innovations. New York: Free Press. 4th Edition
Saad N M (2010). Corporate Governance Compliance and the Effects to Capital Structure in Malaysia", International Journal of Economics and Finance, Vol. 2, No. 1, p. 105.
Sanya, S., & Wolfe, S., (2011). Can banks in emerging economies benefit from revenue diversification? J. Financial Serv. Res. 40, 79-101.
SASRA (2013). The Sacco Societies Regulatory Authority (SASRA). Supervision Report. Nairobi, Kenya.
The SACCO Societies Regulatory Authority, (2013). Sacco supervision annual report 2013. Retrieved from http://www.sasra.go.ke/index.php/resources/publications? Download =64:sacco- supervision-annual-report-2013
Tsai M C, Manor O, & Wan (2010). Long Non-Coding RNA as Modular Scaffold of Histone Modification Complexes", Science, Vol. 329, pp. 689-693.
Uzhegova, O. (2010). The Relative Importance of Bank-specific Factors for Bank Profitability in Developing Economies.
Vătavu, S. (2015). The Impact of Capital Structure on Financial Performance in Romanian Listed Companies Procedia Economics and FinanceVolume 32, 2015, Pages 1314-1322
Veltri, S., &Silvestri, A. (2011). Direct and indirect effects of human capital on firm value: evidence from Italian companies. Journal of Human Resource Costing and Accounting15(3): 232-254.
Ademba, C. (2010, October 5). Challenges facing SACCO regulations in Africa. Paper presented at the 11th SACCA Congress, Swaziland. Retrieved May 9, 2014 from African Confederation of Cooperative Savings & Credit Associations Website, http://www.accosca.org
Aisha, I., Rahila, H., Sadaf, C. and Nisar, A. (2015). Income-diversification in banking sector of Pakistan The Journal of Commerce Vol.7, No.1, pp.11-22
Alhassan, A.L., (2015). Income diversification and bank efficiency in an emerging market. Management. Finance 41, 1318-1335.
Amalendu B, Somnath M and Gautam R (2011).Financial Performance Analysis-A Case Study; Current Research Journal of Social Sciences. Vol 3, PP. 269-275
Banerjee, S., &Velamuri, M., (2015). The conundrum of profitability versus soundness for banks by ownership type: evidence from the Indian banking sector. Rev. Financial Econ.26, 12-24.
Basel Committee on Banking Supervision. (2013).Basel III: The Liquidity Coverage Ratio and Liquidity risk monitoring tools. Bank of International Settlements
CBK Prudential Guideline (2013). Prudential-Guidelines https://www.centralbank.go.ke/wp-content/uploads
Chang, W.S., & Hsieh, J.J. (2011). Intellectual capital and value creation is innovation capital missing link? International Journal of Business and Management 6(2): 1-12.
Daft, R. L., Murphy, J., &Willmott, H. (2011).Organization theory and design. Hampshire,UK: South-Western.
Davis, J.H., Schoorman, F.D. & Donaldson, L. (1997).Toward a stewardship theory of management.Academy of Management Review, 22: 20-47
Donaldson, L. & Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16, 49-64.
Elsas, R., Hackethal, A., &Holzhäuser, M., (2010). The anatomy of bank diversification. J.Bank. Finance 34, 1274-1287.
Emery, G.W.(2013). A pure financial explanation for trade credit. Journal of financial and quantitative Analysis
Gruian,C.M.(2010). What do we mean by "company performance"? Annals - Economy Series, vol. 4.I, 243-255
Houghton, J. D. (2010). Does Max Weber's notion of authority still hold in the Twenty first century? Journal of Management History, 16(4), 449 - 453.
Jane J. B., Muturi, W., Kibati,P., Koima,J.(2017. Effect of Asset Quality On The Financial Performance Of Savings And Credit Societies in Kenya American Journal of Finance. Vol 1, No 4
Janglani S. & Sandhar S.K. (2013). A Study on Liquidity and Profitability of Selected Indian Cement Companies: A Regression Modeling Approach. International Journal of Economics, Commerce and Management United Kingdom, 1 (1), 1-24.
Jensen, M. C., & Meckling, W. H. (2009). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of financial economics .
Julius, B. Adesina, B., Michael N., and Oluwatosin, O. A. (2015).Capital Structure and Financial Performance in Nigeria. International journal of business and social research vol 2 issue 5
Karagu J.M. & Okibo, B. (2014). Financial Factors Influencing Performance of Savings and Credit Cooperative Societies in Kenya, 4(2) 291-302, http:// doi.org//10.6007/IRAFMS/V4-I2/892
Kariuki, B.N. (2014). The relationship between dividend and financial performance of saving and Credit Cooperative Societies registered by SACCO Society Regulatory Authority in Nairobi County. Unpublished MBA Project, University of Nairobi.
Khrawish, H.A. (2011) Determinants of Commercial Banks Performance: Evidence from Jordan. International Research Journal of Finance and Economics. Zarqa University, 5(5): 19-45.
Kioko, C. (2014). Credit information sharing influence on performance of licensed deposit taking SACCO businesses in Kenya. Strategic Journal of Business & Change Management, 1(2).
Kitonga, G.(2013). The Relationship Between Financial Management Practices And Financial Performance In The Shipping Industry In Kenya. An unpublished MBA Thesis, University of Nairobi
Lan, L. L., &Heracleous, L. (2010). Rethinking agency theory: The view from law. Academy of management review, 35(2), 294-314.
Laszlo, A., Laszlo, K. C., &Dunsky, H. (2010). Redefining success: Designing systemic sustainable strategies. Systems Research, 27, 3-21.
McKillop, D., & Wilson, J. O. (2011). Credit unions: A theoretical and empirical overview. Financial Markets, Institutions, & Instruments, 20, 79-123. doi:10.1111/j.1468-0416.2
Meslier, C., Tacneng, R., &Tarazi, A., (2014). Is bank income diversification beneficial? Evidence from an emerging economy. J. Int. Financial Mark. Inst. Money 31, 97-126
Miriti, J. M. (2014). Factors influecing financial performance of savings and credit co-operative societies: A case of capital SACCO, Meru County,Kenya (Master's thesis). Retrieved from http://hdl.handle.net/11295/74255
Mohammad, N. A. and & Nusrat, J. (2014). The Impact of Liquidity on Profitability In Banking Sector Of Bangladesh: A Case Of Chittagong Stock Exchange. International journal of economic and business review Vol - 2 Issue- 10
Mumanyi, E. A. L. (2014). Challenges and opportunities facing SACCOs in the current devolved system of government of Kenya: A case study of Mombasa County. International Journal of Social Sciences and Entrepreneurship, 1 (9), 288-314.
Mvula, R. (2013). Common issues affecting performance of SACCO in Malawi, 8th August, 2013.
Ngui, A. N. (2010). A survey of the use of financial performance indicators by SACCOS in Kenya, An unpublished MBA Thesis, University of Nairobi
Nguyen, M., Skully, M., &Perera, S., (2012). Market power, revenue diversification and bankstability: evidence from selected South Asian countries. J. Int. Financial Mark. Inst.Money 22, 897-912.
Olagunju, A., David, A. O., & Samuel, O. O. (2012). Liquidity Management and Commercial Banks' Profitability in Nigeria. Research Journal of Finance and Accounting, 2(7-8), 24-38.
Olando C.O. Jagongo A. and Mbewa M.O. (2012). Contribution of SACCO financial stewardship to growth of SACCOs in Kenya. Retrieved from: http://www.irmbrjournal.com/papers/1374993792.pdf
Oluoch, O.(2014). Effect of savings and credit co-operative societies' financial services on demand for credit by members - a survey of deposit taking saccos in Nairobi. International Journal of Social Sciences and Information Technology.ISSN 2412-0294 volume 3 issue 8
Olweny, T. & Shipho, T. (2011). Effects of Banking Sect oral factors on the profitability of Commercial Banks in Kenya. Economics and Finance Review, 1(5), 1-30.
Ongore, V.O. &Kusa, G.B. (2013).Determinants of Financial Performance of Commercial Banks in Kenya.International Journal of Economics and Financial Issues, 3(1), 237-252.
Otieno,K.(2016). Growth strategies and transformational orientation adopted by Unaitas Sacco in Kenya. An unpublished MBA Thesis, University of Nairobi
Pandey, I. M. (2010). Financial Management ." Vikas Publishing House (PVT) Ltd, New Delhi
Pennathur, A.K., Subrahmanyam, V., &Vishwasrao, S., (2012). Income diversification and risk:does ownership matter? An empirical examination of Indian banks. J. Bank. Finance 36, 2203-2215.
Pryor, M. G., &Taneja, S. (2010). Henry Fayol, practitioner and theoretician- revered and reviled. Journal of Management History, 16(4), 489-503
Robert, O. (2013) Effect Of Capital Structure On Financial Performance Of Firms Listed At The Nairobi Securities Exchange. Unpublished Nairobi university thesis
Rogers, E.M. (2010). Diffusion of Innovations. New York: Free Press. 4th Edition
Saad N M (2010). Corporate Governance Compliance and the Effects to Capital Structure in Malaysia", International Journal of Economics and Finance, Vol. 2, No. 1, p. 105.
Sanya, S., & Wolfe, S., (2011). Can banks in emerging economies benefit from revenue diversification? J. Financial Serv. Res. 40, 79-101.
SASRA (2013). The Sacco Societies Regulatory Authority (SASRA). Supervision Report. Nairobi, Kenya.
The SACCO Societies Regulatory Authority, (2013). Sacco supervision annual report 2013. Retrieved from http://www.sasra.go.ke/index.php/resources/publications? Download =64:sacco- supervision-annual-report-2013
Tsai M C, Manor O, & Wan (2010). Long Non-Coding RNA as Modular Scaffold of Histone Modification Complexes", Science, Vol. 329, pp. 689-693.
Uzhegova, O. (2010). The Relative Importance of Bank-specific Factors for Bank Profitability in Developing Economies.
Vătavu, S. (2015). The Impact of Capital Structure on Financial Performance in Romanian Listed Companies Procedia Economics and FinanceVolume 32, 2015, Pages 1314-1322
Veltri, S., &Silvestri, A. (2011). Direct and indirect effects of human capital on firm value: evidence from Italian companies. Journal of Human Resource Costing and Accounting15(3): 232-254.
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Published
2018-02-15
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Esokomi, E., & Mutua, D. . M. (2018). DETERMINANTS OF FINANCIAL PERFORMANCE AMONG SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN KAKAMEGA COUNTY KENYA. International Journal of Finance and Accounting, 3(1), 1 – 19. https://doi.org/10.47604/ijfa.583
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