The Effect of Automated Service on Financial Performance of Savings and Credit Cooperative Societies Licenced by Sacco Society Regulatory Authority in Kenya

Abstract

Saccos in Kenya have developed rapidly in terms of size, structure and variety of product and services. They have transformed gradually from manual system of operations based on traditional savings and loaning activities to a more open effective and competitive system which is able to offer an extensive range of products and services. The growth in products, services and membership has led many Saccos automating their services and therefore improved productivity. The objective of the study was to determine effect of automated service on financial performance of Saccos licensed by SASRA in Kenya. This research took a descriptive- survey design type which is designed to describe the characteristics or behaviors of a particular population and in a systematic and accurate fashion. The population under study was made up of 130 Saccos. A sample of 45 licensed Saccos based in Nairobi and Kiambu Counties were selected for this study. The sampling method chosen for this study was convenient sampling which is a form of non-probability sampling. Secondary data was used to collect data on the dependent variable, financial performance. This was done by calculating return on assets. Primary data was used to collect data on independent variables where open and closed ended questionnaires were administered to target population. Significance of automated service quality variables as predictors of financial performance was tested using the F-test. Analysis of Variance (ANOVA) was used. The Statistical Package for Social Sciences (SPSS) version 20 was used to analyze the data collected. The coefficient of determination, R squared, measure was used to test the significance of the regression model in explaining the relationship between automated service quality and financial performance. The study found out that all the Saccos (100%) had undertaken automation of BOSA and FOSA operations in the last 5 years. The study also found out that majority of the Saccos introduced internet banking services, mobile banking and ATM services. These reduced the dependence on the branch network as a core delivery mechanism. From the regression model, the study deduced that taking into consideration all the five factors (expenditure in internet banking, expenditure in automation, expenditure in mobile banking, number of ATM cards issued and size of the Sacco) there is a positive effect on financial performance of Saccos licensed by SASRA. The study concludes that generally automated services have a positive influence on the financial performance of Saccos in Kenya. The study recommends that automation of financial services should be used as a complement to, rather than a substitute for physical branches due to the level of technology literacy in the rural areas.