Determinants of financial self-sufficiency of Deposit-Taking SACCOs in Kenya
Date
2022
Authors
Opondo, Kennedy Ongoro
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Deposit-taking SACCOs in Kenya face a myriad of challenges that negatively impact their ability to continue issuing loans to members and engage in other revenue-generating activities. Among the key challenges facing SACCOs are: non-remittance of deductions by private companies and state agencies, mismanagement, fraud, liquidity constraints, and capital inadequacy. These factors largely threaten the survival of many SACCOs. The general objective of this study was to assess the determinants of Deposit-Taking SACCO self-sufficiency with a focus on the impact of corporate governance practices, loan quality, external finance, liquidity management, and investment choice on the financial self-sufficiency of DT-SACCOS in Kenya. The study adopted a descriptive research design approach employing quantitative data obtained from respective annual reports of SACCOs, SASRA, and other secondary sources. The population used for the study consisted of all the 163 deposit-taking SACCOs in Kenya at the end of 2019, however, to ensure an in-depth and critical analysis of the study variables; a sample of 37 SACCOs was used as computed using the Cochran sampling technique. The study employed a panel regression model for the analysis of the secondary data collected over five years (2014-2018); the results of the analysis of the secondary data revealed a positive relationship between corporate governance, external finance, liquidity management, control variable, and financial self-sufficiency whereas there was a negative relationship between loan quality, investment choice and financial self - sufficiency. Loan quality and investment choice had a statistically significant negative relationship with financial self-sufficiency whereas external finance had a statistically significant relationship with financial self-sufficiency. The study recommends that DT-SACCOs should improve their credit management policies and improve debt collection strategies so as to improve remittances thus reducing the extent of non-performing loans and improving loan quality. DT-SACCOs should seek external financing to improve their cash pool enabling them to increase loans to members and conduct other financial activities without financial distress. Lastly, DT-SACCOs should focus on core activities such as member loans and reduce investment alternatives that expose DT-SACCOs to liquidity challenges and increased financial risks.
Description
Submitted in partial fulfilment of the requirements for the degree of Master of Commerce – Finance at Strathmore University