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The deposit taking saving and credit societies remains a significant player in the provision of financial services to the Kenya household and small business segment. DT-SACCOs are financial institutions which offer similar products like banks and most of them were formed long time ago but their performance is wanting compared to commercial banks and other financial institutions. Their performance and growth in those terms also varies among different DT-SACCOs. Further, there are less previous studies investigating the effect of internal factors on financial performance of deposit taking savings and credit societies in Kenya. The purpose of this study was to establish the effect of internal factors on financial performance of savings and credit societies in Kenya. Specifically, the study sought to; establish the effect of capital adequacy on the financial performance of savings and credit societies in Kenya; determine the effect of asset quality on the financial performance of savings and credit societies in Kenya; evaluate the effect of management efficiency on financial performance of deposit taking savings and credit societies in Kenya; establish the effect of earnings ability on financial performance of deposit taking savings and credit societies in Kenya; determine the effect of liquidity on financial performance of deposit taking savings and credit societies in Kenya; and establish the moderating effect of sensitivity to market risk on the relationship between internal factors and financial performance of deposit taking savings and credit societies in Kenya. The study employed a quasi-experimental design. The target population was 83 registered deposit taking SACCOs in Kenya that had been in operation for the last five years and with audited financial statement. The sample size for the study was all 83 SACCOs that have remained in existence between 2012-2016. Census methodology was used in this study. Both primary and secondary sources of data were employed. Multiple linear regression models were used to analyze the data using statistical package for the social sciences (SPSS) and STATA. A pilot study was conducted to measure the research instruments reliability and validity. Descriptive and inferential analyses were used to analyze the data. The data was presented using tables, figures and graphs. The study found out that capital adequacy and financial performance of SACCOs are positively and significantly related (r2=0.423, p=0.000), asset quality and financial performance of SACCOs are positively and significantly related (r2=0.400, p=0.004), earnings ability and financial performance of SACCOs are positively and significantly related (r2=0.359, p=0.000), liquidity and financial performance of SACCOs are positively and significantly related (r2=0.0012, p=0.000). However, the relationship between management efficiency and financial performance of SACCOs was found to be insignificant (p=0.994). Based on the study findings, the study concluded that all the internal factors except management efficiency had positive significant relationship with the financial performance of deposit taking SACCOs in Kenya. Further, the study concluded that sensitivity to market risk had a significant moderating effect on the interaction between the internal factors (except management efficiency) and financial performance of SACCOs in Kenya. The study recommended that deposit taking SACCOs should adopt efficient systems to improve their capital adequacy, asset quality, management efficiency, earnings ability and liquidity. |
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