Effect Of Unclaimed Financial Assets On The Financial Performance Of Deposit Taking Savings And Credit Cooperatives In Kenya

Abstract

Kenya in 2011 enacted into law the Unclaimed Financial Assets Act to regulate the management of all unclaimed financial asset. The Act requires holding institutions to declare and surrender these assets to the authority by 1st of November every year and established the Unclaimed Financial Assets Authority (UFAA) mandated to obtain, safeguard and reunite unclaimed assets to their rightful owner. A survey done by UFAA in October 2018 estimates that the Sacco held three percent of the total unclaimed financial assets yet to be handed over to the authority, this means that of the estimated Ksh. 241.1 billion unclaimed financial assets being held by about 477,000 institutions, Ksh 7.2 billion was in circulation within the 174 DT Saccos, this mostly being abandoned members dividends, deposits and share capital. The objective of this study was to establish the effect of unclaimed financial assets on the performance of Deposit Taking Saccos in Kenya. The study used secondary data in published financial statements for the period 2014-2018. Statistical Package for Social Science (SPSS) was used for the analysis of data of 15 Deposit Taking Saccos operating in Nairobi County which was subjected to multilinear regression. The study results show that Unclaimed Financial Assets had a significant positive correlation with Return on Assets as a measure of financial performance. This could be interpreted to mean that if the Saccos were to submit this the unclaimed assets held the authority the ROA would drastically reduce. This is the most expected outcome as the regulator gets up for increased collection by putting in place a policy framework initially lacking. The Saccos will also be faced with stiffer penalties on failure to declared and remit unclaimed assets as required by the acts as required to be done every 1st of November for every 12 months period ending 30th June, this penalties may as well wipe out any gains made by the Saccos during the period of non-compliance.