Financial Risk Management and Performance of Savings and Credit Cooperative Societies in Nairobi City County, Kenya

Abstract

Savings and Credit Cooperative Societies play an important of enhancing economic stability and the general welfare of its members. However, in Kenya, the only Savings and Credit Cooperative Societies that have continued to grow in terms of profitability include; Mwalimu National SACCO, Harambee SACCO, Stima SACCO, Kenya Police SACCO, Afya SACCO, United Nations SACCO, UNAITAS SACCO and Metropolitan National SACCO. This is in contrast with the fact that many Savings and Credit Cooperative Societies have been in existence for more than 15 years. This makes it important to focus on financial performance of Savings and Credit Cooperative Societies with reference to financial risks management. Multipurpose objective of this research was to assess influence of financial risks management on financial performance of Sacco Societies in Nairobi City County. The study objectives are; to analyze influence of liquidity risks management on Financial Performance of Savings and Credit Cooperative Societies in Nairobi City; to establish influence of credit risks management on Financial Performance of Savings and Credit Cooperative Societies in Nairobi City and to examine effect operational risks management on Financial Performance of Savings and Credit Cooperative Societies in Nairobi City. The study is constructed on two theories namely; shift ability theory and agency theory. Descriptive research design was adopted by the study. Target populace included all 41 Savings and Credit Cooperative Societies in Nairobi City County in order to get comprehensive information since it is the county with the highest physical concentration of Savings and Credit Cooperative Societies. Census survey was used and therefore all the 41 Savings and Credit Cooperative Societies were part of the sample. Financial reports for specific Savings and Credit Cooperative Societies in Nairobi City County were derived from the SASRA’s website. This was so as to guarantee that data composed is accurate since accurate and systematic data collection is critical to conducting research. It involved obtaining the financial reports from the SASRA’s website for the period between 2014 and 2018. Secondary figures were obtained from SASRA’s yearly reports since 2014. In an effort to enhance the study’s efficiency, secondary facts were gathered by the use of tables which are based on panel data. The process began by editing and inspecting of data collection process so as to identify any errors made by the researcher. Organisation of data was done through inferential statistics using percentages, arithmetic mean and the results presentation was done using frequency distribution tables. The study embraced financial performance as reliant on variable. Data analysis helped in summarizing the data collected and organize it for easier interpretation. Study outcomes showed that there was enthusiastic connotation amid measures of liquidity risks management and performance. The study regression analysis outcome revealed that there was a momentous and affirmative influence of liquidity risks management, credit risks management and operational risks management on performance of Savings and Credit Cooperative Societies. Based on the results, the study concluded that liquidity risks, credit risks and operational risks management all had an effect on performance of Savings and Credit Cooperative Societies is significant. The research commends that Savings and Credit Cooperative Societies would increase on the usage of liquidity risks management, credit risks management and operational risks management in their operations since it has been found that liquidity risks management had an influence on performance of Savings and Credit Cooperative Societies.