Electronic Banking and Profitability of Deposit Taking Savings and Credit Co-Operative Societies in Kenya
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Date
2025-06
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Kenyatta University
Abstract
The deposit taking Savings and Credit Co-Operative Societies play a crucial role in promoting savings and providing credit to the members who often lack access to traditional banking services. However, recent data indicates that many SACCOs are struggling with profitability. Statistics show that only about 30% of these societies are operating at a profit, which raises questions about their sustainability and efficiency. The recent reports also indicate that the average return on asset stands at approximately 1-2%, which is considerably lower than the financial benchmarks set for effective financial institutions. Therefore, this study sought to investigate the effect of electronic banking and profitability of deposit taking savings and credit co-operative societies in Kenya. The electronic banking was measured in terms of mobile banking, electronic funds transfer, automated teller machine utilization and internet banking. The study was guided transaction cost theory, the technology acceptance model, disruptive innovation theory, diffusion of innovation theory, and Schumpeter's innovation theory. A descriptive research design was used. The study target population was 40 teachers based DT-SACCOs controlled by SACCOs Societies Regulatory Authority (SASRA) and are authorized to function in Kenya. A census of 40 teachers based DT-SACCOs was done. The study used secondary data that was collected using secondary data collection sheet. The data collected was analyzed using descriptive statistics. Inferential statistics like correlation analysis and regression were used to establish how one variable influenced the other. The diagnostic statistics done included; multicollinearity test, normality test, and heteroscedasticity test. The results were presented using tables. The research revealed a significant positive impact of mobile banking, electronic funds transfer, automated teller machines, and internet banking on the profitability of deposit-taking Savings and Credit Co-Operative Societies in Kenya. The research revealed that the SACCOs which implement mobile banking access a wider customer segment, enabling them to draw in additional deposits and enhance their ability to lend. Electronic funds transfer decreases the requirement for handling physical cash, thereby lowering expenses related to cash transport, security, and storage. Automated teller machines offer members round-the-clock access to their accounts, enabling them to withdraw funds, check balances, and conduct various transactions without having to go to a physical location. Online banking increases the quickness and effectiveness of service provision, which boosts customer satisfaction and promotes more regular transactions, leading to higher earnings for SACCOs. The research suggests that SACCOs should create a mobile banking app that is user-friendly and straightforward to navigate, allowing individuals of all ages to utilize it efficiently. SACCOs ought to create intuitive mobile apps that enable users to conduct transactions, view balances, and easily access services. The SACCOs analyzed ought to perform comprehensive market research to pinpoint high-traffic locations where prospective members live or are employed. SACCOs ought to invest in strong online banking systems that are easy to use, safe, and able to grow.
Description
A Research Project Submitted to School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Degree of Master of Business Administration (Finance Option) of Kenyatta University, June, 2025
Supervisor;
1.Job Omagwa