Compliance Effects of Sasra Regulations on the Financial Performance of Savings and Credit Cooperative Societies in Kenya

Abstract

SASRA regulations have been in operation since 2010 pursuant to the provisions of the Sacco Societies Act, No. 14 of 2008.However, the compliance effect of these regulations on the financial performance of Deposit Taking Sacco’s (DTS) has not been exhaustively established. Several empirical studies have avoided reviewing detailed aspects of these regulations and how they directly affect the financial performance of the Saccos. As such, the objective of this study is to establish the compliance effect of SASRA regulations on the financial performance of savings and credit cooperative societies in Kenya with specific focus on loan provisioning regulations, minimum capital regulations, and liquidity regulations. The target population was 175 Deposit-Taking Saccos and 185 Non-Deposit-Taking Saccos that had been duly licensed by SASRA to carry out their operations. A purposive sampling technique was used to select the study participants. Data was collected using a questionnaire which was administered to the managers of the selected saccos. Analysis of data was done using both descriptive and inferential statistics with aid of Statistical Package for Social Science (SPSS) computer software package. The study found that the compliance levels of SASRA regulations had a positive effect on the financial performance of SACCOs in Kenya r = 0.910, α = 0.05. This means that as the compliance levels of SASRA regulations increase, the financial performance of SACCOs in Kenya also improves. The multiple linear regression analysis described the goodness of fit, R-squared value, standard error, F-statistic and p-value. The R-squared indicates that the model explained 83% of the variability in the dependent variable. This indicates that there is a strong relationship between the dependent and independent variables. The standard error of the model was also found to be 0.32352. The F-statistic was found to be significant 73.841, which indicates that the null hypothesis can be discarded. The p-value was also found to be significant at 0.000, which confirms that the F-statistic is significant. The study concludes that, though compliance has its costs, it is evident that the benefits to both the individual societies and to the sector as a whole are considerable and cannot be ignored. The analysis of the findings showed that SACCOs have become more compliant since the enactment of SASRA. In addition, SASRA has helped to improve the liquidity and solvency position of SACCOs, as well as their profitability. It recommends that the registration and supervision of SACCOs should be decentralized to counties. This will enable closer monitoring of the operations of SACCOs and identification of problems early enough for corrective action to be taken. Future studies should explore the effect of SASRA on the membership composition of SACCOs. This would include an examination of how SASRA has impacted membership by gender, age group, and location. Additionally, future studies should explore how SASRA has impacted financial inclusion in Kenya. This would include an examination of both the extent to which SASRA has helped to promote financial inclusion and the factors that have hindered its success in this regard. Key words: Performance, Competence, Regulation, Compliance