The effect of implementation of regulation guideline on efficiecy of saccos in Kenya
Efficiency of SACCOs is affected by various characteristics such as membership, deposits, loans and advances, share capital, adoption of technology and managerial competency. This study therefore sought to establish the effect of implementation of regulation guideline on efficiency of SACCOs in Kenya. The main specific objective was to establish the effect of implementation of regulation guideline on efficiency of SACCOs. The study targeted thirty (30) SACCOS that are regulated by SASRA regulations for the period 2009 - 2013. DEA was used to compute efficiency with inputs being member deposits and borrowings; interest/dividend on member deposits and cost of borrowings; staff costs; and other operating expenses (such as rent payable, communication costs, office consumables). Outputs were loans to members and other earning assets (such as interest yielding bank deposits, treasury bills and bonds; investment in rental property; and shares); interest income; and other income (includes interest from bank deposits, treasury bills and bonds; rent from investment property; dividends from shares; money transfer and withdrawal charges). Multiple linear regression analysis between efficiency and regulation guidelines was carried out. From the study, it was found that the implementation of the SASRA regulation had positive effect on the operations and productivity of SACCOs. The immediate effect was increase in number of registered Deposit Taking Saccos membership and deposits. This is an indicator of growth in confidence in the SACCOs due to majority of them getting formalized and rebranded. The findings show that on average there was an increase in efficiency over the 2009 - 2013 periods under analysis. Addition, there was increase in average total factor productivity over this period. More specifically this increase was pronounced on 2011 suggesting that the implementation of regulations has a positive effect on the performance of the SACCOs. Decomposition of the efficiencies show that technical efficiency changes was below 1 suggesting that the contribution of innovations to growth of SACCO‟s was slow. This suggests that the implementation of the regulations guidelines did not compel SACCOs to adopt technology in their operations. This includes adoption of ICTs in service delivery and product development through research and innovations. In addition, the study found out increases in pure efficiency changes since the introduction of the SASRA regulations. The changes in pure efficiency are an indicator of the contribution of management and governance to the productivity of SACCOs. This indicates that the quality of management and governance systems improved during this period and had positive impact on the productivity of SACCOs. The major effect of the regulation is on governance and management of SACCOs which has seen efficiency of SACCOs rise. It is evident from the study that there is more room for SACCOs to improve on efficiency especially in the area of technical efficiency.