Effects of Financial Innovation on Growth of Savings and Credit Cooperatives in Kenya
In a new generation of models studying the impact of innovative activities on firm growth, the focus has shifted to the complex innovation process and channels through which the innovation inputs are transformed into better performance .Due to complex and dynamic environment SACCOs operate from, there is evident force that contributes to collapse of some of them and deteriorating growth for those that survive. This is due to numerous challenges and these challenges are unique and specific to the sector in general its micro economic and macro-economic factors like deficiency in contemporary skills, stiff competition from their competitors, Economic liberalization and regulation of business. Therefore this study sought to fill this gap by answering the question; what are the effects of financial innovation on growth of SACCOs in Kenya? The study adopted a descriptive research design. The population of the study was 150 SACCOs licensed by Sacco Societies Regulatory Authority (SASRA) and that have been in operation during the period 2011 to 2015. Census method was used in this study since the target population was not large. The study was facilitated by use of secondary data that was extracted from published financial reports of the SACCOs, articles and papers relating to relationship between effects of financial innovation on growth of savings and credit cooperatives five-year period commencing 2011 up to 2015.The data collected was therefore cleaned, coded and systematically organized in a manner that facilitates analysis using the Statistical Package for Social Sciences (SPSS).Quantitative analysis was used through descriptive statistics such as measure of central tendency to generate relevant percentages, frequency counts, mode, and median and mean where possible. Regression analysis was also used to determine the relationship between effects of financial innovation on growth of savings and credit cooperatives. The study found that the five variables contribute to 78.1% of growth of SACCOs. The study concludes that value transacted using ATM positively and significantly affects the growth of SACCOs in Kenya The study also concludes that value transacted using mobile banking positively and significantly affects growth of SACCOs in Kenya. The study further concludes that the coefficient for value transacted using internet banking was 0.795, meaning that value transacted using internet banking positively and significantly affects growth of SACCOs in Kenya. The study also concludes that the coefficient for value transacted using EFT was 0.701, meaning that value transacted using EFT positively and significantly affects growth of SACCOs in Kenya The study finally concludes that volume of lending to group positively and significantly affects growth of SACCOs in Kenya. The study recommends that local researchers and academicians should increasingly study the financial innovation to add on to the limited literature in the area. This will ensure that there will be adequate local literature that can be used to relate to local situation. The study recommends that SACCOs should relate their monetary policy instruments to their financial reports. The study recommends that SACCOS should put more emphasis on the internal factors to efficiency. Included in the internal factors are asset quality, capital adequacy, earnings ability, management efficiency and liquidity management.
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