Financial Risk Management Practices and Asset Quality of Deposit Taking Saccos in Nyeri County, Kenya
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Date
2025-09
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Publisher
Kenyatta University
Abstract
Globally and locally, deposit-accepting Savings and Credit Cooperatives (SACCOs) are vital in promoting financial inclusion and economic progress by offering accessible financial services to marginalized populations and encouraging savings and credit access. The quality of their assets is paramount for the overall sustainability of these SACCOs, directly influencing their fiscal well-being, stability, and capacity to effectively manage potential hazards, thus securing their long-term viability. Within Kenya, SACCOs have experienced variability in asset quality, with non-performing loans fluctuating between 1.98% and 2.4% from 2019 to 2023. Nyeri County's asset quality has exhibited even wider fluctuations, varying between -1.4% and 3.5%, suggesting more pronounced difficulties in preserving financial soundness relative to nationwide benchmarks. This research intends to determine how financial risk management approaches influence the asset quality of deposit-taking SACCOs in Nyeri County, Kenya. Specifically, it will examine the impact of managing liquidity, interest rate, operational, and strategic risks on the asset quality of these SACCOs within the county. The study will cover the period between 2019 and 2023 and will be guided by the Liquidity Preference Theory, Interest Rate Parity theory, Operational Risk Management Theory, and the Resolving on Quality Asset Theory. A descriptive research design will be employed. The units of analysis will be the 11 deposit-taking SACCOs in Nyeri County, with operations managers, credit managers, and risk management managers from each SACCO serving as the units of observation. A census will be used to select a sample of 33 managers. Both primary and secondary data will be utilized. For the acquisition of firsthand information, surveys will be the chosen method. Conversely, existing information will be compiled through the utilization of data extraction forms. A preliminary investigation will be carried out in the municipality of Nyeri, encompassing a pair of Savings and Credit Cooperatives. The consistency of the research tools will be evaluated via Cronbach’s Alpha for reliability, and the relevance and predictive power will be examined for validity. Several diagnostic evaluations, such as tests for Normal distribution, collinearity among variables, unequal variance of errors, serial dependence, and the appropriateness of random or fixed effects models, will be executed. The Statistical Package for the Social Sciences will serve as the main analytical software. Both summary statistics and statistical inferences will be employed for data interpretation. Summary statistics will include proportions, counts, central tendency metrics (average), and variability metrics (standard deviation), whereas inferential analysis will involve correlation and panel regression techniques. The presentation of findings will utilize tabular and graphical formats. All ethical principles to guarantee the accuracy of the information will be strictly followed
Description
A Research Proposal Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirment for the Award of Degree of Master in Business Administration (Finance) of Kenyatta University, September 2024
Supervisor:
1.Francis Gitagia