Digital Transformation and Financial Performance of Deposit Taking Savings and Credit Co-operatives in Nairobi City County, Kenya
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Date
2023
Authors
Ogindo, Eunita Atieno
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The deposit taking Saccos in Kenya have registered increased amount of nonperforming loans as well as reduction in liquidity, which have affected their overall
financial performance. Additionally, Saccos have faced stiff competition from other
financial institutions due to their slow uptake of digital transformation in the past.
Currently, there has been an increase in uptake of digital transformation in Saccos.
Therefore, this study sought to examine how digital transformation affects the
financial performance of Nairobi-based Saccos. The specific objectives of the study
were to investigate the impact of mobile banking, ATM services, agency banking
services and internet banking on financial performance. The Study was supported by
financial intermediation theory, agency theory and transaction cost innovation theory.
Explanatory research design was used for this study. The target group consisted of 44
licensed Saccos. 30 Saccos were included in this study. This study used secondary
panel data from 2017 to 2021. The method used was panel regression. While utilizing
descriptive statistics like mean, standard deviation, minimum and maximum, it was
possible to characterize the characteristics of the research variables. Regression and
correlation were also employed. The results showed that agency banking
(β=0.046817, p<0.05) and internet banking (β=0.109425, p<0.05) had a positive and
significant effect on the financial performance of Saccos in Nairobi having districts.
The results also showed that mobile banking (β= -0.00945, p>0.05) and ATM
(β=0.072028, p>0.05) have no significant impact on the financial performance of
saccos by taking deposits in cities in Nairobi. The study concluded that the key factors
improving the financial performance of Saccos deposit beneficiaries in Nairobi
District were agency banking and online banking. The study also concluded that
ATMs and mobile banking have no impact on deposit-taking saccos' financial
success. The paper makes recommendations for enhancing agency banking services
for Saccos that accept deposits. The study also suggests enhancing the online banking
system for managing Saccos that accept deposits. The research also advises the
leadership of deposit-taking Saccos to review their policies on ATMs and mobile
banking in order to identify any potential obstacles to taking appropriate action. For
further studies, longer periods should be considered, loan performance and the quality
of services offered should be looked at.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Degree of Master of Business Administration (Finance) of Kenyatta University
Keywords
Digital Transformation, Financial Performance, Deposit Taking Savings and Credit Co-operatives, Nairobi City County, Kenya