EFFECT OF DEPOSIT RISK ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING SACCOS IN NAIROBI CITY COUNTY, KENYA

Nyaga Edwin Fundi - Master’s Student, Kenyatta University, Kenya

Dr. Lucy Wamugo - Senior Lecturer: Department of Accounting and Finance, School of Business, Kenyatta University, Kenya

ABSTRACT

An economy is highly reliant on a stable financial system for it to thrive, with Savings and Credit Cooperatives forming a critical component under this system. The existence and subsequent operations of financial systems such as Savings and Credit Cooperatives ensures funds flow between the savers and borrowers, an aspect that promotes economic growth and development. The financial performance of deposit taking Savings and Credit Cooperatives in Kenya has been declining over the last 5 years as indicated by Return on Equity. This study aimed to establish the effect of liquidity risks on financial performance of Deposit Taking Savings and Credit Cooperatives in Nairobi City County, Kenya. This research was based on theory of liquidity preference. This research utilized a causal research design with the target population being all 45 Deposit Taking Savings and Credit Cooperatives in Nairobi City County, hence adopting a census approach. Secondary data was obtained from the published financial reports and the Sacco Societies Regulatory Authority Annual reports for the five years from 2017 to 2021. There was the use of descriptive statistics. In addition, there was also the use of regression analysis in determining the effect of dependent variable on the independent variables. Findings to this study indicated that deposit risk had a negative and significant effect on performance of Savings and Credit Cooperatives. Given this case, the recommendation was that Savings and Credit Cooperatives’ management should focus on putting measures in place that focus on increasing their deposit balances as a ratio of the total assets as this would significantly improve performance.

Full Length Research (PDF Format)