Effects of Financing Strategies On operational Efficiency of Deposit Taking Savings and Credit Co-operatives in Nairobi County

Abstract

The purpose of the academic research was to investigate how the operational efficiency of Saccos licensed by SASRA in Nairobi County are influenced by their financing strategies. Though deposit taking Sacco contribute immensely to economic development their input in economy has been constrained by some factors which influence their operational efficiency. These factors led to the researcher formulating a topic that guided the research process and the final results were used to evaluate the effects of financing strategies on operational efficiency of the cooperative societies in Nairobi County registered with SASRA based on the following objective; To determine the effects of financing strategies on operational efficiency of cooperative societies in Nairobi County registered with SASRA. The review of Theoretical framework was done in line with the research variable and a conceptual framework developed in line with the research objectives. Operational efficiency was the dependent variable while members‟ funds, institutional capital, and external borrowing were the independent variables. The study adopted a descriptive research design. According to (Kothari, 2004), descriptive study is concerned with finding out the what, where and how of a phenomenon. The total population of cooperative societies in Nairobi County registered with SASRA as at 2016 was 39. Census methodology was used to identify the 36 Sacco‟s used in data collection. The major source of data used was secondary data collected from SASRA audited financial statements on the deposit taking Saccos in Nairobi County. The data collected was analyzed using SPSS since it allows statistical tools such as regression, correlation which was further presented in tables. All the study variables were found to be having relative significance on operational efficiency of deposit taking Saccos. It was suggested that the study could be explored as a comparative study comparing financing strategies for both urban and rural Saccos and their influence on operational efficiency in both cases. The study established that members funds significantly influences financing strategies and therefore recommends that deposit taking Saccos should adopt new financing strategies in order to increase core capital and members deposits. This reduces the burden of Saccos borrowing to invest in lending which in turn can make the members less efficient in terms of operation. In addition, the study found out that external borrowing significantly influences the financing strategies of the deposit taking Saccos and therefore recommends that managers of Saccos need to determine different sources of external borrowing in order to ensure the capital structure of the Deposit taking Saccos remain optimal.