The effect of Sacco societies regulatory authority’s regulations on financial performance of Saccos in Nairobi county

Abstract

Savings and Credit Co-operatives Societies (SACCOs) in Kenya are required to adhere to regulations set in Sacco Societies Regulatory Authority’s (SASRA) regulations. SACCOs play an increasingly important role in Kenya’s financial sector, serving a growing number of both urban and rural poor households. The management has to present the capital adequacy return reports, liquidity statement report, statement of financial position and statement of deposit return as well as return on investments report which compares land, building, and financial assets to the SACCO’s total assets and its core capital (WOCCU, 2009). The objective of the study was to determine the effects of SASRA regulations on financial performance of SACCOs’ in Nairobi County. The study adopted descriptive research design study in which data was gathered just once over the period 2008 to 2013 for 35 SACCOs in Nairobi County registered by SASRA. The study was facilitated by use of secondary data. Multiple regression analysis was applied to the data to examine the effects of SASRA regulations on investment performance of SACCO’s in Nairobi County. The study revealed that SASRA regulations had positive effects on the financial performance of SACCOs’ in Nairobi County. The study concludes that SASRA regulations have had effects on financial performance of SACCOs’ in Nairobi County. The study revealed that there was a positive relationship between size, liquidity, capital adequacy ratio compliance, managerial quality, cost of income and financial performance of SACCOs’ in Nairobi County. The study revealed that there was a negative relationship between non-performing loans and financial performance of SACCOs’ in Nairobi County. The study revealed that that major variation on financial performance of SACCOs’ in Nairobi County could be accounted by changes in size, liquidity, non-performing loans, capital adequacy ratio compliance, managerial quality and cost of income. The study revealed that there was a strong relationship between financial performance of SACCOs’ in Nairobi County and changes in size, liquidity, non-performing loans, CAR compliance, managerial quality and cost of income as shown by strong correlation coefficients.