Effect of Financial Inclusion Practices on Financial Performance of Deposit-taking Saving and Credit Cooperative Societies in Kenya

Abstract

Increased economic activity and decreased poverty are the results of the financial sector's growth, which makes it easier to get financing. The correlation between financial inclusion and performance of deposit-taking SACCOs financially remains inadequately comprehended, despite the extensive study dedicated to comprehending the theoretical and practical aspects of financial inclusion. The objective of this research was to investigate the extent to which DT-SACCOs in Kenya have enhanced economic outcomes after the implementation of financial inclusion strategies. The study was grounded on a comprehensive analysis of existing literature, which examined the fundamental principles of financial inclusion, agency, and the spread of innovation. The primary objective of the research was to ascertain a cause-and-effect connection between financial inclusion strategies and financial success, specifically in terms of return on assets. The user has shown an interest in learning more about the many types of financial services available, including mobile money transfer services, the breadth of services offered by SACCO organizations, and the uptake of innovative financial products and practices. This research used the DT-SACCO's total assets as the independent variable to characterize its size. This study used a descriptive correlational methodology to analyze data from a sample of 176 DT-SACCOs. A random sample was taken from each of the 122 DT-SACCOs, and for this purpose, only organizations that had full data were considered. We employed a straightforward random sample method by employing the Random function in Microsoft Excel as our random generator. Secondary data was collected from randomly selected businesses and SASRA using a data collecting form based on financial reports covering the years 2018 through 2022. During the course of the data analysis, the two types of statistical approaches were used, inference and descriptive. The statistics applications of the Social Science Statistical Software suite were used to analyze the data. The Durbin- Watson test, the Shapiro-Wilk test, and the F-test were among the diagnostic techniques used to examine the variables' normality, autocorrelation, and multicollinearity. Pearson's correlation coefficient was merely one of many regression models utilized. Pearson's correlation, one-way analysis of variance, and the Student's t-test were used to determine statistical significance. There was a strong correlation between people's level of financial involvement and their economic success. New service development, financial service diversity, and mobile money transfer tendencies were all considered. There was a favorable association between SACCO agency procedures and financial success, however it was not statistically significant. Financial inclusion policies were shown to affect DT-SACCOs' performance in Kenya, however the analyzed factors only explained 46.1% of the variance in DTSACCOs' performance. The findings generally confirm previous studies that mainly focused on banking institutions. The study recommends the need to incorporate the findings into the public and corporate policy, such as expansion of asset portfolios and mobile and digital strategies. Given the limitations of the study, there is need for further research to cover other sector specific concerns, the potential of electronic and digital technologies, and inclusion of other variables.