Determinants Of Efficiency Of Deposit Taking Savings And Credit Cooperative Societies In Kenya

Abstract

The main objective of the study was to establish the determinants of efficiency of deposit taking savings and credit cooperative societies in Kenya. This study used descriptive research design and focused on a target population of 99 DTs. Secondary data was used in the study from all the Saccos sampled with the data being extracted from the financial statements which had been audited for the year ended 31st December 2012 to 31st December 2016.The study found that the independents variables (technology, firm size and credit risk) contributed to 79.3% of the variation in efficiency. The study also established that technology and credit risk were the strongest determinants of efficiency with firm size being the least determinant. The study from the ANOVA results established that the model was significant in determining the relationship between dependent variable (efficiency) and the predictor variables (credit risk, technology and firm size) as the probability value was less than 0.05.The study established that technology had a positive relationship with efficiency whereby holding all other independent variables constant, a unit increase in technology led to 0.544 increase in efficiency, its p value was less than 0.05 hence significant. Firm size had a positive relationship with efficiency where a unit increase in firm size led to 0.081 increase in efficiency holding other independent variables constant. Firm size was statistically significant in determining efficiency since its p value was less than 5%.Credit risk had an inverse relationship with efficiency where a unit increase in credit risk led to a 1.123 decrease in efficiency and its p value was less than 0.05 which showed that credit risk was statistically significant in determining efficiency. The study recommended DTs need to make sure that they have robust and well defined loan policies so as to make sure that their “cash cow” such as investment in loan portfolio is prudently managed so as to affirm sustainability and efficient management of the same. The study also recommended that DTs should put in place the clear rules and guidelines on how credit decisions are made for the benefit of potential investors and Sacco growth, which will ensure minimization of conflict of interest that might cause decrease in efficiency. DTs make sure their employees are trained on Deposit Taking Saccos policies. The study recommends that DTs should emphasize on setting reasonable minimum monthly contribution targets as this is the only way members will help improve the financial performance of DTs. The study also recommended thorough audit of DTs financial statements to ensure accountability and transparency.