Effects of liberalization on the investment practices of reserve funds and payment of dividends in savings and credit co-operatives in Nairobi comparative survey
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Date
2003-09Author
Bwoma, Bernard N
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Savings and credit co-operative societies popularly known as SACCOs were set up with
the objective of promoting thrift and to provide sources of credit to members at fair rate
of interest. According to Co-operative societies Act Cap 490 section 45 of the laws of
Kenya, each Sacco is to transfer 25% of the net surplus of each financial year before
distribution to reserve fund. The Act restricts where these reserve funds should be
invested. It also states that no more than 10% of members' deposits should be paid as
dividends to members.
In 1997, through seasonal paper number 6, the co-operative sector was liberalized which
entailed the transfer of services and functions initially done by the ministry of cooperatives
to the Saccos. This project tries to find out whether liberalization caused any
effects on investment practices of reserve funds and distribution of dividends.
In the study a sample of 30 Saccos were randomly selected from Nairobi Province, and
the period of study was 1992 to 2001. From the findings mean reserve funds mean
growth rate increased from12.66% to 19.85% in pre and post liberalization respectively.
Dividend payment rate increased from a mean of 4.12% to 5.12% in pre liberalization
and post liberalization respectively. It is very clear that liberalization of the cooperative
sector had a positive effect on the distributions and reserve funds. In terms of investment
practices, 60% of the Saccos shifted to new areas of investment after liberalization
allowed by the Act. Liberalization then had an effect on dividend payment and
investment practices on Saccos. However more research needs to be done in this area.
Sponsorhip
University of NairobiPublisher
School of Business, University of Nairobi