The Effect of Fraud on Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Kenya

Abstract

Fraud is a global problem affecting the society as a whole. It cuts across all walks of life. Fraud has been in existence from long time. It is a complex problem since the perpetrators will always try not to leave any trail. Fraud affect organizations through loss of funds which can lead to low amount of funds available for business, can lead to loss of customer confidence and time wasted through investigations. The study sought to determine the effects of the various types of fraud on the financial performance of deposit taking SACCOs in Kenya. The study used a descriptive design. The population of interest in this study was the deposit taking SACCOs that are operating in Kenya between the years 2009 to 2013. The study sampled 10 deposit taking SACCOs in each sector of the Sacco Industry. The sectors are Manufacturing, Health, Financial, Agricultural and Institutional. The total number of the sample was 50 deposit taking SACCOs. The type of data collected for this study was both Primary and secondary data for the purpose of analyzing the effect of financial fraud on financial performance of deposit taking SACCOs in Kenya. Primary data was obtained through self-administered questionnaire so as to collect the required data. Secondary data was obtained from SASRA records on the financial statements of deposit taking SACCOs. The descriptive statistical method; SPSS was used to describe the data and determine the extent used. Descriptive statistics such as frequencies, percentages, means and standard deviation was used to report and present data. The usage of Multiple Regression analysis model was used to determine the effect of independent variables on the dependent variable. Correlation coefficient was used to investigate how the independent variables inter-relate with the dependent variable. Analysis of Variance (ANOVA) was performed to determine the impact of independent variables on the dependent variable in the multiple regression analysis. From the regression model, the study found out that there were factors influencing the financial performance of deposit taking SACCOs in Kenya, which are fraud due to behavioral causes, fraud due to technological causes, fraud due to management causes and fraud due to legal causes. The study found out that the Y-intercept was 0.426 for all years. The four independent variables that were studied explain a substantial 66.4% of financial performance of deposit taking SACCOs in Kenya as represented by adjusted R2 (0.664). The study therefore concludes that fraud influences the financial performance of deposit taking SACCOs in Kenya.