Firm Characteristics And Firm Efficiency Of Deposit Taking Savings And Credit Cooperatives Societies In Kenya
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Date
2024-11
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Kenyatta University
Abstract
Saccos contributes 2% of Kenyan GDP where output of members` loans account a 73.9% of the total industry asset size while input of members deposits forms the main source of financing. Complaints on loan issuance and other short term obligations maintain relatively high levels at 24.69%,19.72% and 22.27% for years 2019, 2018 and 2020 respectively contrary to growing members` deposit contributions with an average paid interest on deposits declining from 7.1%, 6.72% and 6.01% from year 2017, 2019 and 2020 respectively. Studies relates the interplay between firm characteristic, liquidity mediatory role and moderation by SASRA as a remedy to the anomaly. This study`s general objective sort to investigate effect of firm characteristics on firm efficiency in deposit taking SACCOs in Kenya. Specifically, the study assessed effect of age, earning asset, capital structure and technological investment on firm efficiency of deposit taking savings and credit society in Kenya being moderated by SASRA regulations and mediated by liquidity levels. The study was underpinned by financial intermediation theory, economic efficiency theory, capital structure theories, task technology fit theory, life cycle learning theory of the firm and neo institutional theory. The study adopted a positivist paradigm and causal research design. The study was census in nature where quantitative secondary panel data was extracted from all SACCOS audited financial reports between year 2015 to 2021.The target population was 176 deposit taking societies in Kenya as at 31st December 2021 and response rate was 100%. Diagnostic tests were carried on panel unit root test for model effects suitability, tests on multicollinearity, normality, heteroscedasticity and autocorrelation to avoid spurious results. Efficiency scores were generated through data envelopment analysis model and regression analysis run through stata version13.Study findings, conclusions and recommendation were presented using graphs, tables and charts. The study findings indicate that Saccos efficiency is not optimal but has an increasing growth trend with variable return to scale contributing the highest efficiency levels relative to scale efficiency and constant return to scale efficiency. Age has a positive and statistical significance while capital structure has a positive but not significantly effect on level of efficiency. Technological investment and DTS` size has a negative but significant relationship to influence saccos efficiency levels. Saccos have maintained low levels of asset size in adherence to regulation in contrast to registered liquidity ratios above the minimum required threshold by authority. Additionally, the study established that liquidity mediates relationship of firm characteristics and firm efficiency while Sasra regulation does not significantly moderate relationship between firm characteristics and firm efficiency. The study recommends deposit taking savings and credit societies to formulate and implement long term survival strategies while concentrating on core business of loans issuance and cautiously engage on investment of excess funds. Management board should strategize and put in place rebate payment policy and adhere to the set regulations on external borrowing and enhance strategies on deposits collections. The study recommend government to reduce levies imposed on member’s deposit in order to enhance efficiency levels. The study suggests further research to ascertain whether the specific capital structure mix elements are significant influencers to deposit taking savings and credit societies` efficiency. Additionally, a study is recommended on the ideal deposit levy rate to ensure a balance between funding the regulation activities and deposit`s levies rate which is not detrimental to deposit taking savings and credit societies efficiency in Kenya.
Description
A Thesis Submitted To The School Of Business, Economics And Tourism In Fulfilment Of The Requirements For The Award Of The Degree Of Doctor Of Philosophy In Business Administration Of Kenyatta University.
Supervisors:
1. James Gatauwa
2. Caroline Kimutai