ASSESSMENT OF THE EFFECT OF EXTERNAL FINANCING ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVES IN KISII CENTRAL DISTRICT, KENYA

Abstract

The Kenya cooperative sector plays a significant role in the Kenyan financial sector. It contributes 45% of the country’s GDP. Previously, lack of funding has been identified in a number of studies as one of the main constraint hindering the growth of this sector. In recent years, a number of agencies have made lines of credit available to SACCOs for the purpose of on-lending to SACCO clients. Despite the increase in credit, studies indicate that many SACCOs are unable to meet the demands of their clients for loans and withdrawal of savings. This brought forth the question of the relevance of external financing in promoting SACCO activities. The general objective of this study was to assess the effect of external financing on the financial performance of SACCOs in Kisii Central District. A descriptive survey design was used for the study. The target population was 243, comprising board members and management staff. Proportionate random sampling was used to obtain a sample of 100 respondents. A semi-structured questionnaire was used to collect quantitative data from the sampled SACCOs. Both qualitative and quantitative techniques were used to analyze data. Quantitative data were analyzed using descriptive statistics such as the mean, percentage, tabulation, frequency distribution and Likert scale. The results were presented in narrative form, tables, and charts. The study indicated that 88.9% of the sampled SACCOs had received external financing whereas the remainder 11.1% had not received any form of external financing. The findings showed that financial performance was influenced by financing and investment policies, and portfolio quality. The research findings can provide information and knowledge that gives practical advice and guidelines to lenders, potential borrowers, and the cooperative sector.