Effects of Debtors’ Management on Financial Performance of Savings and Credit Cooperative Organizations in Nandi County, Kenya

Ogla Jelagat; Maniagi Musenga; Ayub Shitseswa

doi:10.51867/ajernet.4.2.44

Authors

Ogla Jelagat MBA Finance student, School of Business and Economics, Masinde Muliro University of Science and Technology, Kenya
Maniagi Musenga PhD, Senior Lecturer, Accounting and Finance School of Business and Economics, Masinde Muliro University of Science and Technology, Kenya https://orcid.org/0000-0003-3248-6933
Ayub Shitseswa PhD, Senior Lecturer, Accounting and Finance, School of Business and Economics, Masinde Muliro University of Science and Technology, Kenya https://orcid.org/0000-0002-3340-7064

DOI:

https://doi.org/10.51867/ajernet.4.2.44

Keywords:

Financial Performance, Management of Loan Debtors, SACCOs

Abstract

Savings and Credit Cooperative Organizations (SACCOs) are key components of the economy and social development. However, it’s experiencing both internal and external issues that should be handled. The study attempted to identify the effects of business financial parameters on the performance of SACCOS in Nandi County. Specifically, the study investigated the effects of the management of loan debtors on the financial performance of SACCOs in Nandi County. The study was guided by liquidity preference theory, human capital theory, efficient structure theory, and Pecking order theory. The study used a descriptive research design to examine all the influences on financial performance. The target population was therefore all the ten SACCOS in Nandi County registered and licensed as of January 2023, where eighty-seven employees were randomly sampled to participate. The primary sources of data collection used in data collection were structured questionnaires as the main tool. Content validity was used to determine the validity, while Cronchbach’s alpha coefficient was used to determine the reliability of the research instrument. The data was analyzed using both descriptive and inferential statistics. For descriptive statistics, tables and narratives were used, and for inferential statistics, correlations and regression analyses were used. The Statistical Package for Social Sciences software (SPSS) helped with data analysis. The study findings indicated that there was a positive and significant effect of loan debt management on the performance of Saccos in Nandi County (t = 9.833, P < 0.05). The study recommended that Sacco management should maintain a credit policy manual to help in debt recovery and even avail the required resources needed for effective management of loan debtors.

References

Allen, F., & Gale, D. (2004). Financial Intermediaries and Markets. Econometric, 72, 1023-1061. https://doi.org/10.1111/j.1468-0262.2004.00525.x DOI: https://doi.org/10.1111/j.1468-0262.2004.00525.x

Baumol, W. J., & Tobin, J. (1958). The Optimal Cash Balance Proposition: Maurice Allais' Priority. Journal of Economic Literature, 27(3), 1160-1162.

Calomiris, C., Heider, F., & Hoerova, M. (2014). A Theory of Bank Liquidity Requirements. Columbia Business School Research Paper No. 10.2139/ssrn.2477101. https://doi.org/10.2139/ssrn.2477101 DOI: https://doi.org/10.2139/ssrn.2477101

Chahayo, S. A., Bureti, P., Juma, Maende, M. C., Douglas, M., & Aketch, R. A. (2013). Analysis of Financial Mismatch in cooperative societies in Kakamega County, Kenya. International Journal for Management Science and Technology, 1(5), 767-785.

Farhi, E., Golosov, M., & Tsyvinski, A. (2009). A Theory of Liquidity and Regulation of Financial Intermediation, 76(3), 973-992. https://doi.org/10.1111/j.1467-937X.2009.00540.x DOI: https://doi.org/10.1111/j.1467-937X.2009.00540.x

Ghasemi, A., & Zahediasl. (2012). Normality tests for statistical analysis: a guide Growth of Savings and Credit Co-Operative Societies' Wealth. https://doi.org/10.5812/ijem.3505 DOI: https://doi.org/10.5812/ijem.3505

Government of Kenya. (2008). Kenya Vision 2030: A Globally Competitive and Prosperous Kenya. National Economic and Social Council (NESC), Nairobi.

Hartarska, V. (2005). Governance and Performance of Microfinance Organizations in Central.

Hayes, A. (2022). Event of Default: Definition, Examples, Vs. Default. Investopedia. https://www.investopedia.com/terms/e/event-of-default.asp

Holmstrom, K., & Jean T. (1998). Private and Public Supply of Liquidity. Journal of International Journal of Business and Social Science, 3(24), 204-219. https://doi.org/10.1086/250001 DOI: https://doi.org/10.1086/250001

Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. John Maynard Keynes.

Kobia, S. K. (2011). The co-operative movement in Kenya: Challenges and opportunities. Nairobi: Lukiko Consulting Trust.

Kothari, C. R. (2009). Research Methodology: Methods and Techniques, Second Revised Edition. New Age International (p) limited, Publishers.

Kothari, C. R. (2009). Research Methodology: Methods and Techniques (2nd edition). Delhi: New Age International Publishers.

Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and Psychological Measurement, 30(3), 607-610. https://doi.org/10.1177/001316447003000308 DOI: https://doi.org/10.1177/001316447003000308

Makori, J., Munene, C., & Muturi, W. (2013).The challenges facing deposit-taking savings and Credit cooperative societies' regulatory compliance in Kenya. A case of the Gusii region. Interdisciplinary Journal of Contemporary Research in Business, 4(12), 1013-1081.

Miriti, J. (2014). Factors influencing financial performance of savings and credit cooperative societies: A case of Capital SACCO, Meru County. Unpublished MSc Project, Nairobi: University of Nairobi.

Mugenda, O. M., & Mugenda, A. G. (2003). Research methods: quantitative and qualitative approaches. Nairobi: Acts Press.

Mulema, A. A., Lema, Z., Damtew, E., Adie, A., Ogutu, Z., Duncan, A. J., (2017). Stakeholders' perceptions of integrated rainwater management approaches in the Blue Nile Basin of the Ethiopian highlands. Nat. Resour. Forum, 41, 244-254. https://doi.org/10.1111/1477-8947.12126 DOI: https://doi.org/10.1111/1477-8947.12126

Ngwu, T. C. (2006). Bank Management. Owerri: Bob Publishers.

Olando, C. O., & Mbewa, M. O. (2012). Financial Practice as a Determinant of Growth of Savings and Credit Co-Operative Societies' Wealth (A Pointer to Overcoming Poverty Challenges in Kenya and the Region. International Journal of Business.

Olando, C. O., Jagongo, A., & Mbewa, M. O. (2013). Contribution of SACCO financial stewardship to the growth of SACCOs in Kenya.

Oztuna, D., Elhan, A. H., & Tuccar, E. (2006). Investigation of Four Different Normality Tests in Terms of Type I Error Rate and Power Under Different Distributions. Turkish Journal of Medical Science, 36(3), 171-176.

Sammy. (Year). "Contribution of SACCO financial stewardship to growth of SACCOs in Kenya." International Journal of Swaziland, 1(2), 1-16.

SASRA (2008). SACCO Societies ACT NO. 14. Retrieved from http://www.sasra.go.ke

SASRA (2014). Sacco Supervision Annual Report (Vol. 254). Retrieved from http://www.sasra.go.ke

SASRA (2015). Guideline On Deposit-Taking SACCO. Retrieved from http://www.sasra.go.ke

SASRA (2018). SACCO annual supervision report 2018. Retrieved from http://www.sasra.go.ke

Saunders, A., & Cornette, M. (2011). Financial Institutions Management, a Risk Management Approach, 7th ed. McGraw Hill/Irwin.

Taye, H. (2014). Analysis on liquidity management practices of five private commercial banks in Ethiopia (Doctoral dissertation, St. Mary's University, Ethiopia).

Yashwant, S. (2014). Non-performing assets caused by increase default in the corporate lending segment. Journal of Environmental Research and Development, 8(4), 1005-1015.