Abstract
The main aim of the investigation was to analyze the effect of operational and market risk exposures on the financial performance of DT-SACCOs in Kenya. The specific objectives of the study were to; assess the effect of operating expense risk exposure on the financial performance of DT-SACCOs in Kenya; To establish the effect of operation efficiency risk exposure on the financial performance of DT-SACCOs in Kenya; Effect of interest rate risk exposure on the financial performance of DT-SACCOs in Kenya; Effect of foreign exchange rate risk exposure on the financial performance of DT-SACCOs in Kenya. Effect of operational and market risk exposure on the financial performance of DT-SACCOs in Kenya. The study used panel data between the years 2010-2019 which was 10 years period. The results revealed that at both bivariate and multivariate regression operating expense risk, operating efficiency and foreign exchange risk exposure had a significant effect on the financial performance of DT-SACCOs in Kenya. Only interest rate risk exposure did not have a significant effect on the financial performance of DT-SACCOs in Kenya.
Highlights
The Sacco Societies Act No 14 of 2008 in the Laws of Kenya defines “deposit-taking business” as- (a) A Sacco business in which the person conducting the business holds himself out as accepting deposits on a day-to-day basis; and (b) Any other activity of the Sacco business which is financed, wholly or to a material extent, by lending or extending credit for the account and at the risk of the person accepting the deposit, including the provision of short-term loans to members
The main objective of the study was to the effect of operational and market risk exposures on financial performance of Deposit Taking (DT)-SACCOs in Kenya
The results revealed that at both bivariate and multivariate regression operating expense risk, operating efficiency and foreign exchange risk exposure had significant effect on financial performance of DT-SACCOs in Kenya
Summary
The Sacco Societies Act No 14 of 2008 in the Laws of Kenya defines “deposit-taking business” as- (a) A Sacco business in which the person conducting the business holds himself out as accepting deposits on a day-to-day basis; and (b) Any other activity of the Sacco business which is financed, wholly or to a material extent, by lending or extending credit for the account and at the risk of the person accepting the deposit, including the provision of short-term loans to members. According to Bessisand O'Kelly, (2015) risk is an uncertainty measure of the future payoff of an investment, measured for some time horizon relative to a certain benchmark. This implies that risk is a measure that can be quantified especially when comparing two potential investments one would want to identify and desire the less risky investment. According to Wolke (2017), operational risk entails the projection of loss as a result of scarce or neglecting processes, structures or guidelines. These may be occasioned by employee errors, systems failures or fraud. In order to manage such operation risk exposures, SACCOs should establish an operational risk control structure that suits the manner, measure and involvedness of their processes to efficiently recognize, evaluate, monitor and mitigate operational risks (SASRA, 2017)
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