EFFECT OF STATUTORY REGULATIONS ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE ORGANIZATIONS IN NAKURU COUNTY, KENYA

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.