The Effect of Investment Decisions on the Performance of Savings and Credit Cooperative Societies in Kenya

Abstract

The outcome of this study revealed the impact of different investment decisions on the performance of the SACCOs in Nairobi County, Kenya. Taken as antecedents, the study measures the impact of each decision on SACCO performance using a multiple linear regression model on lending, real estate investment, expansion, R&D, and employee literacy as a mediating factor. The secondary data was collected from 46 SACCOs based on their timely reporting and high level of compliance to the regulatory standards set by the SACCO Societies Regulatory Authority (SASRA).This paper shows that lending operations especially extension of credit in short term and mobile products increases SACCO profitability and member participation. Other sectors that are positive include; real estate investment, property, Real Estate Investment Trusts (REITs) and others because they offer regular income and growing asset base. Market development and branch establishment decisions are used to reveal that they enhance the profitability due to the increased market reach of SACCOs. Businesses’ research and development spending is consistent in delivering positive returns through sales and technological advancements that assist organizations in creating sustainable competitive advantages and superstructures. Additionally, increased employee literacy also assumes the role of mediator in the relationship between efficiency and profitability of operations. This study establishes the concept of strategic investment decision making and a positive impact of employees’ literacy level in enhancing such investment on the overall performance of SACCOs. This work could be useful for SACCOs planning to leverage this area to achieve efficiency in investment and financial improvement. SACCOs should therefore go on expanding the lending products; here mobile and short term loans in order to capture the needs of different members besides improving on returns. Secondly, Real estate continues to be a favorable and valuable kind of investment; for this reason, SACCOs should erect capital on rental and REITs to garner more returns. One key area of focus to enhance the performance of SACCOs should be opening up additional branches and venturing into other untapped market segments in order to greatly increase membership. Further, an amendment of the R&D investment can improve the competitiveness of SACCOs, and the services they offer in an ever-changing financial market which is critical in the growth of SACCOs. The present paper elicited that increasing SACCOs employees’ literacy and technical skills will go a long way in boosting up the organizational operations, hence the organizational outcomes, because the overall service delivery is increased.