Portfolio Diversification and Profitability of Deposit Taking Savings and Credit Cooperative Societies in Kiambu County, Kenya
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Date
2025-04
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Publisher
Kenyatta University
Abstract
Deposit taking Sacco‟s in Kiambu County have all along played a very important role
in the enhancement of the economy‟s GDP since their times of establishment. Just
like other enterprising organizations, profitability is the bottom line of savings and
credit cooperative societies. However, various profitability metrics of these entities in
Kenya having been dropping of fluctuating. Therefore, it is important to examine the
causative factors of the decline in profitability of DT-SACCOS. This study was done
to evaluate the portfolio diversification and its effect on profitability of DT-SACCOS.
The study aimed at determining the influence of loans and advances its effect on
profitability of DT-SACCOS, real estate investments its effect on profitability of DT SACCOS, financial investments its effect on profitability of DT-SACCOS, and cash
equivalents on the profitability of DT-SACCOS in Kiambu County, Kenya. The
Modern portfolio theory, the Keynesian theory and the rent theory of profit were the
theories applied in this study to understand the relationship between the portfolio
diversification and the profitability of DT Saccos Kiambu County. A mix of
descriptive and explanatory research designs was adopted. The 13 DT-SACCOS in
Kiambu County constituted the accessible target population of the study .The census
method was adopted to collect data since the target population was small. Secondary
data pertinent to these DT-SACCOS was obtained from their respective audited
financial statements and reports through desk analysis. The collected data covered the
period from 2013 to 2022, a ten year period of operation of the Sacco‟s. The STATA
Version 10 was used for analysis. Various descriptive statistics were used to analyze
the collected data such as frequencies, percentages, mean and standard deviation.
Correlation, simple linear, and panel regression analyses constituted the inferential
statistics. Diagnostic tests that were conducted before undertaking inferential
statistical analysis included linearity, normality, homoscedasticity, multicollinearity,
and autocorrelation tests. The outcome of the analysis was presented in graphical
formats. Various ethical issues were put into consideration throughout the research
process. The study found out that loans and advances had a positive significant effect
on the profitability of DT- Saccos in Kiambu County, real estates had a positive effect
on the profitability of DT- Saccos in Kiambu County, financial investments had a
positive significant effect on the profitability of DT- Saccos in Kiambu County and
finally cash and cash equivalents had a positive significant effect on the profitability
of DT- Saccos in Kiambu County. The study therefore concluded that loans and
advances positively influenced the profitability of DT SACCOS, Real Estates as well
positively affected the profitability of the DT Saccos, Financial investments also
positively influenced the profitability of the DT Saccos and finally Cash and Cash
equivalents positively influence the profitability of the DT Saccos in Kenya. The
study recommended that the DT Saccos in Kiambu County should increase their
investment in Loans and advances, put up more real estate investments, increase their
financial investments and also add more to their cash and cash equivalent investments
in order to improve on their profitability within Kiambu County. Further studies
should also be conducted and using both primary and secondary data to examine how
the same factors impact the Sacco‟s return on investments through incorporating
different financial performance measures.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree in Master of Business (Finance), Kenyatta University April, 2025
Supervisor:
1.Vincent Shiundu Mutswenje