The effect of mobile Sacco service on the financial performance of licensed deposit taking Saccos in Nairobi county

Abstract

SACCOS have developed rapidly in terms of size, structure and variety of products and services by embracing technology to increase the speed of transactions, give clients more flexibility and reduce costs of doing business. With the introduction of M-Sacco, it is expected that the SACCOS’ financial performance will improve as the SACCOS’ avail their services to their members on the mobile platform thus increasing the volume of their transactions. The study sought to establish the effect of Mobile Sacco service on the financial performance of licensed deposit taking SACCOS in Nairobi County with a focus on all 42 licensed deposit taking SACCOS in Nairobi County. The secondary data in this analysis covered a period of 4 years (2011 – 2014) and extracted from the audited financial statements which included comprehensive income statement and Statement of financial position. Data was analyzed using a linear regression equation model to establish the effect of Mobile Sacco service on financial performance of SACCOS in Nairobi County. From the regression model, the study found out that there were factors influencing the financial performance of licensed deposit taking SACCOS in Nairobi County, which are Number of M-SACCO transactions carried out, investment in MSACCO service, size of SACCO, capital and management quality. They either influenced it positively or negatively. The five independent variables that were studied (Number of MSACCO transactions carried out, investment in M-SACCO service, size of SACCO, capital and management quality) explain a substantial 65.8% of financial performance of licensed deposit taking SACCOS in Nairobi County as represented by the adjusted R2 (0.658). The study concludes that Number of M-SACCO transactions carried out, investment in MSACCO service, size of SACCO, capital and management quality significantly influenced the financial performance of licensed deposit taking SACCOS in Nairobi County. The study therefore recommends that SASRA should enhance the authority’s regulations such as ensuring safety and security of member’s deposits through establishment and implementation of the Deposit Guarantee Fund (DGF), increased savings and credit due to stability in the Sacco subsector. The study also recommends that SACCO mangers should be have training programs on application of business process automation to promote growth and development of skills and technical capacities within the Sacco sub-sector since it is through the business process automation that has led to mobile banking being used in the delivery of services to members of SACCOS.