FINANCIAL REGULATIONS AND FINANCIAL PERFORMANCE: (A CASE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN MOMBASA COUNTY, KENYA)
Abstract
The general objective of the study was to determine the relationship between financial regulations and financial performance of deposit taking Savings and Credit Cooperatives in Mombasa County, Kenya. A descriptive research design was used in the study. Accordingly, a census method involving all the 11 DT SACCOs in Mombasa County was conducted. The research utilized secondary data. The raw primary data collected was coded prior to being input into SPSS statistical analysis software. The study found that the DT-SACCOs maintain adequate capital requirements. Core capital; risk-weighted assets, total capital and equity capital have a significant effect on the financial performance of DT SACCOs in Mombasa County. Credit risk management affects the financial performance of Deposit Taking SACCOs. The credit scoring mechanisms are followed as directed by the SACCOs regulators. Liquidity management affects the financial performance of deposit taking SACCOs in Mombasa County. There was a strong correlation between the independent and dependent variables. There were beta coefficients of 0.612, 0.755, 0.734 for capital adequacy, credit risk management and liquidity management respectively. The study concluded that the DT-SACCOs have adopted capital provisioning policy recommended in Prudential Guidelines. Credit risk management is one of the most important functions affecting the financial performance of financial institutions since they are faced with diverse risks in their operations. The level of liquidity of an institution which was measured by the ratio of total loans to customer deposits or customer deposits to assets ratio had a great influence on financial performance. The study also concluded that firm size had a significant influence on the financial regulation and consequently the financial performance of SACCOs. The study recommended all the SACCOs in Mombasa County to establish policies that clearly outline the Organizational view of capital adequacy and requirement guidelines and the terms and conditions that should be adhered to in order for optimal capital levels are maintained. The study also recommended that the DT- SACCOs in Mombasa should restrict loans and avail loans/credit to the clients depending on their characteristics, capacity/completion, conditions, collateral/security, commonsense/reasonableness and also their contribution. The study also recommended that for efficient and effective credit risk management systems credit policy in the SACCOs should be reviewed regularly, for instance, on quarterly or annual basis. Deposit taking SACCOs in Mombasa County should adopt liquidity management that enhance their compliance with the law and regulatory bodies.
Key terms: Capital Adequacy, Credit Risk Management, Liquidity Management, Firm Size
CITATION: Kanzenge, S., & Wekesa, M. W. (2024). Financial regulations and financial performance: (A case of deposit taking savings and credit cooperative societies in Mombasa County, Kenya). The Strategic Journal of Business & Change Management, 11 (4), 662 – 680. http://dx.doi.Org/10.61426/Sjbcm.v11i4.3110
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