Electronic Banking and Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Western Kenya

Abstract

Most Savings and Credit Cooperative Societies in Kenya have adopted Information and Communication Technology (ICT) innovations as part of their operations with a view of maximising benefits and enhancing service delivery. However there is limited research on impact of adoption of technological innovations and performance of Saccos. Therefore this research was carried out to determine the correlation between electronic banking and financial performance of Deposit-taking Saccos in Western Kenya. Secondary data was collected from audited and published annual statements that contained information on total assets, net income, total shareholders’ equity, expenditure on electronic banking and total capital of Deposit-taking Saccos. The data provided useful information that helped to derive annual performance of Deposit-taking Saccos measured as return on assets, electronic banking (electronic banking expenditures), capital adequacy and liquidity. The study results showed a feeble positive correlation between electronic banking adoption and financial performance of Saccos. But there exists a strong positive correlation between Sacco’s capital adequacy and Sacco’s liquidity. In view of these findings, there is need for management of Saccos to act rationally in adoption of innovations such as e-banking and work methods that promote efficiency to ensure minimum cost and maximum net benefits. Electronic banking would help Saccos improve effectiveness in customer service delivery which may enhance membership mobilisation.