Effect of Financial Management Practices on Financial Performance of Savings and Credit Co-operative Societies in Mombasa County, Kenya

Abstract

The study sought to establish effect of financial management practices on financial performance of Saccos in Mombasa county, Kenya. The study was anchored by Liquidity management theory, Resource based management theory and Stakeholder theory. The study used descriptive research design and data was collected by administering questionnaires to a sample of target population. Data analysis was done using percentage, means, frequencies, correlation and regression analysis.The research used regression analysis to investigate the association of cash management, financial planning, financial reporting and analysis and number of Sacco members on financial performance of Saccos in Mombasa county. Descriptive analysis on Sacco policies showed cash budgeting as an important practice in most of the Saccos with a mean score of 3.60. Under financial planning objective, the creation of financial statements had the highest mean score of 4.33 while creation of business proforma in Saccos obtained the lowest mean score of 3.00 implying that majority of the Sacco members were not for this financial planning decision. Based on correlation matrix, cash management had a huge effect on financial performance of Saccos with the highest score of 0.637 followed by financial reporting and analysis at 0.299.In this study, cash management practices were found to have big effect in the financial performance of Saccos as was demonstrated by a strong regression coefficient. The regulator should also ensure all Saccos embrace financial reporting and analysis throughout their operations as per financial reporting standards. Number of Sacco members was also found to have an effect on profitability of Saccos. Sacco management should come up with ways of registering more members to join their Saccos through vigorous campaign. To attract more members, management can consider issues like proper loan policies, better returns in the form of dividends, and open membership to any adult citizen. The study recommended that researchers and scholars should carry out a research on other factors affecting financial performance of Saccos in Kenya not covered in this study.