The impact of efficiency of deposit-taking Sacco’s on the cost of credit in Kenya

Abstract

The study aimed to determine the impact of efficiency of deposit-taking SACCOs on the cost of credit in Kenya. To be more precise, establish the level of efficiency of deposit-taking SACCO establish the nexus of SACCO efficiency, and the intervening inflation effect on the cost of creditin Kenya. The study used a correlation research design to determine the relationship. The sample used 42 deposit-taking SACCOs in the country which was compiled from the SASRA regulations 2019. The study used secondary data for five years, 3Pt December 2015 to 3Pt December 2019, which will be considered sufficient for the study and will be analyzed to determine the relationship between the variables to be used in the study. From the findings, 52% was the average value of the DT-SACCO technical efficiency and Afya Sacco Societies Limited was the most technically efficient overall. Technical efficiency had a negative relationship with the control variables and this resulted in a drop in their operations while cost efficiency had the same negative relationship but resulted in a rise in their operations. The independent variables, inclusive of control variables, had different impacts on the Cost of Credit in Kenya. Technical efficiency and competition had a positive impact of 505.27 and 0.000000414 respectively while cost efficiency and size had a negative impact of -48,884.79 and -3,171.53 respectively. The mediating variable, inflation rate, had a negative intervening effect of -5.2830 on the impact ofDT-SACCO efficiency on the Cost of Credit in Kenya. The study recommends that the DT-SACCOs should cap and inform the people of their cost of credit to ease the research for future purposes and for the smaller DT -SACCOs to merge to form bigger ones resulting in economies of scale. Hence, the study concluded, by meeting all objectives, that the efficiency of deposit taking SACCOs has an impact on the Cost of Credit in Kenya.