A Survey on the Investment Practices Among Savings and Credit Cooperative Societies (Saccos) in Nairobi

Abstract

The uncertainty of cash flows, cost of funds and return on investment in ever changing financial markets require financial institutions to develop investment strategies for effective and efficient portfolio management. Savings and credit co-operative societies are financial institutions whose primary functions is similar to other financial institutions and involve generating funds from their members by sell of shares and savings deposits to its members and then lending the funds to members in form of personal loans. This study is inclined to exploring the various techniques that SACCOs employ in portfolio management. It also looks into the prominent constraints that influence investments choices and selection.

The study findings points to a lapse in professional investment practice mainly in the area of asset allocation and selection. Majority of the SACCOs surveyed exhibited a pure passive policy punctuated by sampling and buy-and-hold strategies. It has also been evident that only strategic and integrated asset allocation strategies were followed. In terms of asset selection, SACCOs rely more on historical financial data to project the future share prices. Nevertheless, investor needs and preferences and investment liquidity are the key constraints to investment. It is therefore highly recommended that to optimize value generation, SACCOs may need to adopt some degree of professionalism in investment management.