Relationship between financial structure and growth of saving and credit cooperative societies’ wealth in Machakos county

Abstract

Over time, saving and Credit Cooperative Societies (SACCOs) have been investing heavily to ensure achievement of their objective (mobilizing funds and granting credit to members) but they have not been able to grow their wealth significantly. This lack of Growth of SACCOS’ Wealth has threatened their sustainability such that they have not been able to absorb their operational losses. This has led to the losses been absorbed by members’ savings and share capital, which leads to their impairment. Although studies have been done there is insufficient information linking the growth of SACCOs wealth in Kenya in Machakos County to Financial Structure factors; internal financing and external financing jointly. The study attempted to understand the factors that can explains the growth of shareholders wealth of SACCOs in Machakos County. The objective of the study was establish the relationship between financial structure and growth of saving and credit cooperative societies’ wealth in Machakos County. This study used a descriptive survey in soliciting information in the area of research of Financial Structure and growth of SACCOs’ wealth. The target population was 33 SACCOs which were active in Machakos County in the year 2012. The study used census and data was collected from secondary sources. The data collected was analyzed using both descriptive and inferential statistics with assistance of Statistical Package for Social Sciences (SPSS) software version 17.0. The study found that; increase internal financing increase led to an increase in Growth of SACCOs wealth which was explained by a B-coefficient of 0.046 (meaning as internal financing increases, Growth of SACCOs wealth increases too) and vice versa. it was further found that an increases in external financing led to an increase in growth of SACCOs wealth (B-coefficient = 0.182) and vice versa. The study found that Growth of SACCOs wealth as predicted by internal financing (p-value = 0.011) and external financing (p-value = 0.000) and the coefficient of determination of 72.90%. The study therefore concludes that internal financing is associated to growth of SACCOs wealth in Machakos County, and external financing is associated growth of SACCOs wealth in Machakos County, answering the study pertinent questions. The study recommends that; SACCO should review or design their policies on internal financing to ensure that optimum internal financing was availed; SACCOs should either review their by-laws and working policies to ensure that the optimum external financing is encouraged. Further studies should be conducted to strengthen the information on the area studied.