EFFECT OF COMMERCIAL BANK LOANS ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KAKAMEGA COUNTY
Abstract
The general objective of SACCOs is to promote the economic interests and general welfare of its members. However, SACCOs have received stiff competition from commercial banks and as a result, many SACCO members have moved to borrow from the commercial banks; there was therefore the need to find out how commercial bank loans have affected the financial performance of Savings and Credit Co-operative societies. Financial sector liberalization in Kenya and the world has created an enormous spectrum from which Savings and Credit Cooperative Societies (SACCOs) can raise finances. This has coincided with a period of good performances for a number of SACCOs. However, there is no certain indication of a link between the good performance and the financing diversification. This research sought to establish the effect of commercial bank loans on the performance of SACCOs. The specific objective was to; determine the effect of bank loan interest rate on financial performance of SACCOs. The population for this study was 41 KUSCCO- member SACCOs both affiliates and non affiliates with a target population of 205 officers. Simple random sampling was used to determine the sample size. The study used descriptive survey with the target population being 205 officers of all the 41 registered (KUSCCO) members in Kakamega County from data base. Data was collected from every Sacco using a questionnaire and analyzed using both descriptive and inferential statistics. Simple regression was performed on each construct of commercial bank loan against financial performance. From the results bank loan interest had a beta, β1 value of 0.705 at p≤ 0.05 when regressed with financial performance. In conclusion, there exist statistically significant linear correlation between commercial bank loans and financial performance of SACCOs. The study recommended SACCO management to be keen in ensuring the interest rate levied on loans is kept as low as possible to attract more customers. The findings are of importance to the stakeholders, employees and management of SACCOs in Kakamega County. The findings also formed a basis for reference by researchers and interested academicians in future.
Key Words: bank loan, interest rate, financial performance
CITATION: Sembeya, A. V., & Otinga, H. N. (2019). Effect of commercial bank loans on financial performance of savings and credit cooperative societies in Kakamega County. The Strategic Journal of Business & Change Management, 6 (2), 2148 – 2160.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1246
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