Financial Practice as a Determinant of Growth of Savings and Credit Co - Operative Societies’ Wealth
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Date
2012-12
Authors
Olando, C.O.
Mbewa, M.O.
Jagongo, A. O.
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal of Business and Social Science
Abstract
Savings and Credit Co-operative Societies (SACCOs) in Kenya have been investing over the years with the objective of maximizing their wealth. As is the case with all investments, wealth maximization is a key objective whenever SACCOs have chosen an investment avenue from a universe of possible investment vehicles. Studies have shown that lack of sufficient Growth of SACCOs’ Wealth has made it difficult for them to absorb their operational losses, which has threatened their sustainability. This has led to the losses being absorbed by members’ savings and share capital, hence lose of members’ savings. While the purpose of SACCOs is to mobilize members’ funds and grant credit for the members’ development, this has made it difficult for the SACCOs to grow their wealth, achieve this objective and contribute favorably to National Domestic Savings. This failure to build enough SACCOs’ wealth, through accumulation of institutional capital, is attributable to weak financial stewardship, inappropriate capital structure and imprudent funds allocation strategy. The purpose of this paper is to assesses the financial practice as a determinant of growth of wealth of SACCOs with a view of ameliorating the situation for socio-economic development. This study used descriptive design in soliciting information on the determinants of growth of SACCOs’ wealth. Data was collected from the census of 44 SACCCOs in Meru county using a questionnaire and document review tool, and
analyzed using both descriptive and inferential statistics. The study findings indicated that Growth of SACCOs wealth depended on Financial stewardship, Capital structure and Funds allocation strategy. The study further found that SACCOs inadequately complied with their by-laws; incomes from investments did not adequately cover their costs. The study recommends that SACCO should; continuously review credit policies, establish irrecoverable loan provision policies, develop sound staff recruitment policies, use appropriate financing mix. And that the Government should review legal framework to ensure that institutional capital is used to grow SACCOs wealth.
Keyword: Capital Structure, Growth of SACCOs’ Wealth, Financial Stewardship, Funds Allocation Strategy, Institutional Capital, Operational Losses, Sustainability of SACCOs
Description
Keywords
Capital Structure, Growth of SACCOs’ Wealth, Financial Stewardship, Funds Allocation Strategy, Institutional Capital, Operational Losses, Sustainability of SACCOs
Citation
International Journal of Business and Social Science Vol. 3 No. 24 [Special Issue – December 2012