DETERMINANTS OF FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN NAKURU TOWN, KENYA

Abstract

The Savings and Credit Cooperative Societies (SACCOS) are financial institutions in the line of co-operatives societies that aims to meet common needs of the members through savings mobilization, loans and financial advisory services. They enhance economic growth and development by availing funds to members so as to engage in viable business ventures. Despite this contribution, SACCOs have not been able to perform effectively in Kenya due to financial instability in their operations. Therefore, the researcher felt the need to investigate the determinants of financial performance of Saccos in Nakuru Town, Kenya. The objectives of the research study were based on; membership size, frequency of supervision and employment management practices. It was further guided by theories; organizational theory and trade-off theory. Descriptive survey research design was employed and helped in detailed capture of important information for the study. Census technique was used to include all Managers of 32 SACCOs in Nakuru town who provided data through structured questionnaires. Inferential and descriptive statistical methods incorporated means, standard errors, correlation coefficients and regression coefficients to analyze the data. The study findings showed that membership size affected financial performance of SACCOs. The correlation between the membership size and financial performance was positive and statistically significant (r= 0.564; p<0.001). The employment management practices were found to affect financial performance as expenditure was 35.8% lower (P< 0.1) within the budgeted estimates. SACCOs were recommended to improve their service delivery to attract more potential members and still keep the existing ones. The researcher further recommended better alignment of employment management practices to organization structure to make them more relevant as they play key role in financial performance. This research work would benefit the Saccos through encouraging them to engage in practices that can lead to financial stability in their organizations. As such, they will be able to deal with obstacles that hinder their service delivery to their members.