Effect of Management Efficiency on Financial Performance of Savings and Credit Societies in Kenya

Abstract

Purpose: The purpose of this study was to evaluate the effect of management efficiency on financial performance of savings and credit societies in Kenya.Methodology: The study employed an explanatory research design. The target population was 83 registered deposit taking SACCO’s in Kenya that have been in operation for the last five years. The sample size for the study was all 83 SACCOs that have remained in existence since 2011-2015. Census methodology was used in the study. Both primary and secondary sources of data were employed. Multiple linear regression models were used to analyze the data using statistical package for the social sciences (SPSS) and STATA. A pilot study was conducted to measure the research instruments reliability and validity. Descriptive and inferential analysis was conducted to analyze the data. The data was presented using tables and graphs.Results: Based on the findings the study concluded that management efficiency has no significant influence on the financial performance of savings and credit societies in Kenya. The univariate regression results showed that management efficiency has no significant influence on the financial performance of savings and credit societies (p=0.173).Unique contribution to theory, practice and policy: The study recommended that with regard to credit risk management, the management should undertake measures to improve Capital adequacy, Asset quality, Management efficiency, Earnings and Liquidity. Further, the study recommended that SACCO's should train their employees as this is likely to increase their productivity.

Determinants of Profitability and Financial Sustainability of Saving and Credit Cooperatives in Eastern Ethiopia

“…The result of the model is as per the prior expectation and in line with x-efficiency theory, which says efficient firms (lower cost) tend to earn higher profit. The result is consistent with the findings of Atsango (2018), Ashenafi and Cherinet (2018), Barus et al (2017) and Zergaw (2015), who found that OE has a negative and statistically significant effect on profitability, but against the finding of Ochingo and Muturi (2018), Ngumo and Collins (2017), Fujo and Ali (2016) and Hesborn et al (2016), who found that OE has a positive and significant effect on profitability; perhaps, this can be attributed to external factors, which are responsible for such variations.…”

“…The model result is as per the prior expectation and in line with x-efficiency theory, which states that efficient firms (lower cost) tend to earn higher profit, which could result in financial sustainability. The result is consistent with the findings of Atsango (2018), Ashenafi and Cherinet (2018), Barus et al (2017) and Zergaw (2015), who found that OE has a negative effect on financial performance. However, the model result is opposite to the finding of Melesse ( 2019), Abate et al (2013) and Nyamsogoro (2010), who found that OE has a positive effect on financial sustainability.…”

“…The result substantiated with the findings of Yitayaw (2017), Oigo (2015), Ongore and Gemechu (2013) and Ayele (2012) found a significant and positive relationship between ME and profitability. However, Barus et al (2017) found that managerial efficiency has no significant effect on profitability.…”

“…Ochingo and Muturi (2018) examined the effect of firm characteristics on the financial performance of SACCOs in Kenya and revealed that capital adequacy, asset quality, OE and liquidity had a positive and statistically significant effect on the financial performance of SACCOs. Barus et al (2017) found an inverse relationship between OE and financial performance of SACCOs considering SACCOs operating in Kenya from the period 2011-2015. However, the result was against the finding of Fujo and Ali (2016) and Hesborn et al (2016), who reported a positive and significant relationship between operating efficiency and financial performance.…”

“…Oigo (2015 identified factors affecting the financial performance of deposit-taking SACCOs in Kisii County, Kenya, and revealed that capital adequacy, asset quality, management capability and earning quality significantly influence financial performance. However, Barus et al (2017) concluded that ME has no significant effect on the financial performance of SACCOs in Kenya.…”