FIRM CHARACTERISTICS AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT CO-OPERATIVES IN NAIROBI CITY COUNTY, KENYA

Moses Mutunga, James Gatauwa

Abstract


Financial systems serve as frameworks for providing money changing and payment processing services; quality, asset transforming in terms of their denomination and maturity and lately control and management of risks. The SACCOs perform a key role in the financial sector of Kenya which span from access, mobilization of savings and also creation of wealth. The study’s objective was to ascertain the effect of firm characteristics on performance of the SACCOs in Nairobi City County, Kenya. Specifically, the assessment sought to assess the effect of firm size, management efficiency, assets quality and capital adequacy on financial performance of SACCOs in Nairobi City County, Kenya. The assessment was anchored on agency, efficiency structure and market power theories. Causal research design was utilized. Target population is the licensed deposit taking SACCOs in Nairobi City County that were fully in existing for the study period which is 2014 to 2018. The total number of SACCOs that were fully operation in Nairobi City County within this period is forty-two (42). A census was utilized due to the few number of target population. The analysis was premised on secondary data to be assembled via data review guide. Both descriptive and panel regression analysis were done. Diagnostics tests for multicollinearity and normality was undertaken before the inferential analysis. Ethical considerations were also complied within the entire research. It was concluded that firm size, management efficiency, asset quality and capital adequacy had a positive effect on financial performance of the SACCOs. It was recommended that the small SACCOs should consider merging with other SACCOs so as to increase their size and in return their asset base. The managers and other employers should be trained on how to manage the SACCOs so as to enhance their efficiency and effectiveness. The management of the SACCOs should evaluate the quality of assets they intend to use in the daily operation of the SACCOs. The SACCOs should ensure that the have the right capital that is adequate to ensure that the SACCOs can meet their prime function which is lending.

Keywords: Firm Size, Management Efficiency, Assets Quality and Capital Adequacy on Financial Performance

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