Factors Affecting Financial Performance of Savings and Credit Societies in Kilifi County- A Case Study of Imarika Sacco

Abstract

Financial performance is one of the key objectives for all organisations (including SACCOs).Financial performance is measured by use of many ratios and models like the return on investment, profit margin, efficiency ratios, liquidity ratios etc. All organizations strive to utilize it resources effectively so as to achieve higher financial performance. Competition in the market affects the level of performance in an organisation. For an organization to survive in the competitive market, it has to invest in research to analyze the market dynamics and interpret them well and timely towards adopting strategies to cope with in the market. Credit management as well as the extent that an organisation embraces technology towards financial innovation contributes to the performance of an organisation. Credit management, financial innovation and liquidity management defines the financial performance of a SACCO and as a result, many SACCOs are initiated but growth potential remains a dilemma. With the constant change in technology, an organization needs to be very innovative and adopt technological changes in order to retain customers. Use of technology leads to convenience and efficiency which implies brings about repeat business and customer loyalty. Customer loyalty drives higher performance in an organization. Many studies have focussed on other financial institutions like banks ignoring SACCOs. The main objective of this study was to establish the relationship between credit management, financial innovation and liquidity managemnt and their effects towards SACCO's financial performance. This research problem was studied through the use of a descriptive and quantitative research design. The population of interest of this study was be 397 members selected from a stratified sampling method based on the branch where they belong. The SACCO has its head office at Kilifi and branches in Malindi, Mariakani and Mtwapa, with a membership of 53,503. Stratified random sampling technique was used to draw participants proportionally from the branches, hereby referred to as the strata. Using a confidence and interval levels of 95% and 0.05% respectively, Slovin formula was used to determine the study sample and in this case, 397 study participants were involved and a response rate of 89.92% was registered. Data was collected from primary sources using structured questionnaires with open and close ended questions using a five scale Likert questionnaire format. Data analysis was done using a statistical package for social scientists (SPSS) version 20, and results hereof was interpreted in a brief and meaningful manner using tables and charts. Frequencies and percentages mean, standard deviation, coefficient of determination was used to describe the relationship between the factors affecting financial performance of SACCOs as perceived by respondents herein. The results of the study indicated a strong positive correlation between the independent variables and the dependent variables, thus indicating that financial innovation, credit management and liquidity management affects financial performance of SACCOs in Kilifi County. The regression model summary indicated a 0.770 as R, meaning that 77% of the financial performance was explained by the relationship. The study recommended further studies on other factors other than the ones in this study that affects financial performance of SACCOs.