Financial Innovations and Performance of Deposit Taking Saving and Credit Cooperatives in Nairobi City County, Kenya
With increasing varying business environment that is categorized by uneven markets, scientific advances, strategy changes, and increasing reliance on non-price rivalry has lured service sectors to be inventive to meet ever changing customers’ demand, and equally ensure sustainability and growth of their firms. The enormous performance characterized by vast investment in financial innovations and training of workforce to handle the novel technologies by Deposit Taking Savings and Credit Cooperatives has raised a concern for an investigation on the relationship between financial innovations and performance to ascertain if performance of Savings and Credit Cooperatives Societies is manipulated by their financial innovations. The main objective of this study sought to determine the effect of financial innovations on performance of Deposit Taking Savings and Credit Cooperatives in Nairobi City County, Kenya. The specific objectives were: to assess effect of new products, new service process and new organizational form on financial performance, and to determine the moderating effect of firm characteristics on the relationship between financial innovations and performance of Deposit Taking Savings and Credit Cooperatives in Nairobi City County, Kenya. In view of the study specific objectives, four hypotheses were formulated and tested. The study was anchored on regulatory dialectic theory, regulation and taxation theory, pecking order theory and agency theory. The study adopted positivism research philosophy and employed use of both descriptive and explanatory research designs. The target population was licensed Deposit Taking Savings and Credit Cooperatives in Nairobi City County, Kenya while the accessible population was 19 Deposit Taking Saccos that had been operating and licensed by Sacco Societies Regulatory Authority between the years 2010 to 2014. Purposive sampling technique was employed and the sample size was 76 respondents of senior employees though only 68 responded. A structured questionnaire was self-administered to gather primary data while secondary data was derived from the financial statement of the Savings and Credit Cooperatives Societies. SPSS version 21 was used to analyze data using regression analysis. The study found that new products has a statistical significant relationship with liquidity (p=0.000) and capital adequacy (p=0.006). New service processes has a statistical significant relationship with liquidity (p=0.011) and capital adequacy (p=0.001) while new organizational form has a statistical insignificant relationship with profitability (p=0.737) and capital adequacy (p=0.344). The results from the study further indicate that firm characteristics have moderating effect on the relationship between financial innovations and performance (p=0.000). The study therefore concludes that both new products and new service processes have significant influence on performance. The study recommends that Savings and Credit Cooperative Societies to adopt financial innovations strategies to enhance efficiency in all their operations boost profitability and expand their market share focusing on firm characteristics as an additional advantage; management of Savings and Credit Cooperative Societies to embrace research and development to foresee new and innovative ideas to advance their performance; Sacco Societies Regulatory Authority to develop effective regulatory and surveillance structures that will ensure adoption of financial innovation strategies by Deposit Taking Saving and Credit Cooperatives focusing on their firm characteristics to enhance their efficiency and performance.