Abstract:
Savings and Credit Cooperative Organizations (SACCOs) have been recognized
worldwide as important avenue of economic growth. In Kenya, SACCOs remain the
most important players in the provision of financial services and have deeper and
extensive outreach than any other type of financial institution. However, against a
backdrop of losses and reduced profitability loss of members to banks, inadequate
capital structures, inefficient liquidity management, incompetent staff and poor
corporate governance the government established SACCO Societies Regulatory
Authority (SASRA) which was mandated to develop statutory regulations for
effective management of SACCOs. The purpose of this study therefore was to assess
the effect of selected statutory regulations on financial performance of SACCOs. The
study was guided by four theories; Buffer theory of Capital Adequacy, Capital Asset
Pricing Model, Earnings Theory of Capitalization and Anticipated Income Theory.
The study employed a descriptive research design using quantitative approaches. The
target population was FOSA managers, finance managers, credit managers and
internal auditors all totaling 64 targeted respondents from SACCOs in Nakuru
County, Kenya. The study used a census approach to collect data and it used closed
ended questionnaires in collecting primary data. Secondary data was collected from
SASRA annual publications. The questionnaires were pretested to ensure validity and
reliability. The collected data was summarized and analyzed using both descriptive
and inferential statistics and then presented in tables. From the findings, capital
adequacy (r = 0.267) and asset quality (r = 0.080) had a positive and weak correlation
with ROE. However, earnings performance (r = -0.013) and liquidity (-0.082) had a
negative and weak correlation with ROE. The study concluded that since all the
variables had some effect on financial performance, it would be prudent for SACCO
to adhere to these regulations in order to enhance their performance.
