EFFECT OF ASSET PERFORMANCE MANAGEMENT ON PROFITABILITY OF DEPOSIT TAKING SACCOS IN NAKURU COUNTY

Abstract

Sound asset performance management is a prerequisite for a financial institution‟s stability and continuing profitability, while deteriorating asset performance management is the most frequent cause of poor financial performance and condition. SACCOs must therefore ensure that the management of asset performance is efficient and effective. The study was guided by four variables; loan performance management, fixed assets management, financial investments management, and accounts receivables management. This study was anchored on four theories; Capital Asset Pricing Model, Modern Portfolio Theory, Inventory Development Model, and Operating Cycle. The study used explanatory research design, stratified proportional sampling and random sampling technique. The study used both primary and secondary data. Primary data was collected using structured questionnaires. The target population was branch and operations managers from each of the Saccos in Nakuru and management staff from various departments of the Deposit Taking SACCOs from the main office. Data was analyzed using descriptive statistics including, frequencies, mean and standard deviations and inferential statistics methods including correlation coefficient and with the assistance of SPSS as the tool of analysis. The research findings indicate there exist a significant positive correlation between loan performance management and profitability of deposits taking Saccos in Nakuru County(r=0.866, p<0.05), and a statistically significant positive relationship between loan performance and profitability of deposits taking Saccos in Nakuru County(β = 0.316, p<0.05). A significant moderate positive correlation exist between fixed assets management and profitability of deposits taking Saccos in Nakuru County(r=0.645, p<0.05), a statistically significant positive relationship exist between fixed assets management and profitability of deposits taking Saccos in Nakuru County(β = 0.206, p<0.05). The results indicate that there is a significant moderate positive correlation between financial investments management and profitability of deposits taking Saccos in Nakuru County(r=0.622, p<0.05). A statistically significant positive relationship between financial investments management and profitability of deposits taking Saccos in Nakuru County was also established (β = 0.336, p<0.05). There exist a significant moderate positive correlation between accounts receivables management and profitability of deposits taking Saccos in Nakuru County(r=0.782, p<0.05). It was established that there exists a statistically significant positive relationship between accounts receivables management and profitability of deposits taking Saccos in Nakuru County(β = 0.256, p<0.05). Conclusions can be made that loan performance management, fixed assets management, financial investments management and accounts receivables management have a significant effect on profitability of deposit taking Saccos in Nakuru County. It can be concluded that fixed assets management has a significant effect on profitability of deposit taking Saccos in Nakuru County. It was recommended that Managers should increase the frequency and level of loan performance assessment due to the fact that it was found to be the most significant in enhancing Saccos profitability. The transaction costs involved in accounts receivables should also be kept at a minimum as these also affect the profitability of the Sacco.