| dc.description.abstract | The objective of this study was to identify the determinants of financial performance of Savings and Credit Cooperative (SACCO) societies in Kenya. Financial performance was measured using return on asset (ROA) and return on equity (ROE).
A cross-sectional time series data covering the period 2002-2007 was compiled from audited financial records of the sample societies. Random-effects generalized least square (GLS) regression was used to relate financial performance to factors hypothesised to be determinants of performance.
During the period under consideration, ROA had a median value of 6.37%, with a minimum of 0.3% and maximum of 14.5%, while ROE had a median value of 7.33%, a minimum of 0.64 and a maximum of 17.81. The size of the SACCO has a positive and significant impact on both ROA and ROE, suggesting presence of economies of scale. However, previous studies that looked at the impact of size on financial performance of firms have produced inconsistent results. The size of loan to members relative to total asset was positive and highly significant predictor of performance, confirming the a priori premise that loan is the most productive asset of any financial institution. Similarly the proportion of equity capital relative to asset was positive and significant, indicating that capital structure is important. High growth in assets and loan to members is related to high financial performance. The ratio of operating expenses to total asset was negative and highly significant indicating that better cost management could improve performance.
Further studies should look at organization, in particular the impact of top management, effectiveness of planning and skill in financial performance of SACCOs. | en |
