Risk Reduction Practices on Financial Competitiveness of Savings and Credit Co-Operative Societies in Kirinyaga County, Kenya

Abstract

Despite the existence of SASRA regulation, many SACCOs are still experiencing challenges due to the inability to manage various risks more efficiently. High costs of operation, non-performing loans and changes in interest rates are some of the aspects which have contributed to the deteriorating financial performance of SACCOs in Kirinyaga County. To overcome the challenges facing SACCOs this study sought to investigate risk reduction practices adopted by SACCOs in Kirinyaga County to enhance financial competitiveness. This study was based on the financial theory, Credit Risk Management theory and the Stewardship theory. The specific objectives of this study were: to determine the risk prevention practices employed by SACCOs, to investigate the risk detection practices employed by SACCOs and to determine the risk control practices employed by the SACCOs in Kirinyaga County. The study adopted descriptive research design in order to assess the problem under investigation. The study adopted a census approach to collect information from 23 SACCOs operating in Kirinyaga County. Primary data was collected from the top management of the SACCOs using questionnaires. Data collected was analyzed using the Statistical Package for Social Sciences (SPSS version 21) software. The response rate of the administered questionnaires stood at 75%. The descriptive statistics utilized in this study were mean, percentages and standard deviations whereas the inferential statistics included; ANOVA, multivariate and bi-variate regression and Pearson Correlation. The study established a positive and significant relationship between the independent variables; risk prevention practices, risk detection practices and risk control practices and the dependent variable financial competitiveness of SACCOs within Kirinyaga County. The coefficient of determination was at 83.1 %, an indicator that the three explanatory variables explained more than eighty percent of variance in the financial competitiveness of SACCOs in Kirinyaga County. The p-value and regression coefficients generated after running the regression model were as follows; for risk prevention practices (β= 0.471, p= 0.012), risk detection practices (β= 0.251, p=0.037) and risk control practices (β= 0.376, p= 0.003). The study concluded that risk prevention practices, risk detection practices and risk control are important in influencing the financial competitiveness of SACCOs. This study therefore, recommends the implementation of risk management strategies in all the SACCOs in order to improve their financial competitiveness. The findings of this study are of benefit to the practitioners’ in the co-operative sector, policymakers and researchers in the field of risk management