EFFECT OF SASRA REGULATIONS AND REGULATORY CHALLENGES ON FINANCIAL PERFORMANCE OF NYANDARUA COUNTY’S SACCOSKENYA

Abstract

ABSTRACT Credit unions known as savings and credit cooperatives societies in Kenya are important in financial sector in credit access, savings and economic development. In the year 2008, Kenya government introduced SACCO Society Regulatory Authority (SASRA) regulation’s to monitor SACCOs sector after continued problems of poor management, misuse of members’ savings and poor financial performance. Since then some SACCOs have adopted these regulations and licensed. However these SACCOs have faced implementation challenges and the effect of adopting these regulations on financial performance in the context of Nyandarua County is not known. This research sought to establish the effect of SASRA regulations and regulatory challenges on financial performance of SACCOs in Nyandarua County. Three objectives; To examine the effect of SASRA regulations on financial performance of SASRA registered SACCOs in Nyandarua County, to establish the effect of regulatory challenges on the relationship between SASRA regulations and financial performance of SASRA licensed SACCOs in Nyandarua County and to establish the joint effect of the regulatory challenges and SASRA regulations on financial performance of these SASRA licensed SACCOs were considered. Three theories; agency theory, trade off theory and stakeholders’ theory were used to study the problem under investigation. A census of 5 SASRA licensed SACCOs in Nyandarua County was done. Descriptive research design was used because the researcher wanted to know the current position of SACCOs after SASRA regulations. Questionnaires collected primary data while data collection sheet collected secondary data from annual financial statements three years prior and after licensing whereby data on financial performance inform of key financial performance ratios were calculated. Descriptive and inferential statistics were used in data analysis whereby correlation, regression and ANOVA were done. Multiple regression was used to analyse relationship between the variables while t-test tested the hypotheses. The analysis showed that SACCOs adopted SASRA regulations and maintained the minimum core capital although capital adequacy requirement improved with challenges. SACCOs fully complied with the SASRA regulations and the correlation result showed SASRA regulations slightly improved financial performance of the SACCOs as measured by ROA. Similarly, the R² statistic provided a 4.1% of the total variance of the challenges faced by the SACCOs as explained by SASRA regulations. On the overall, the study found SASRA regulations and financial performance with a non-significant correlation with ROA at 99% level of confidence. This may be due to the fact that SASRA regulations implementation is at initial stages and also the cost associated with SASRA regulations compliance and licensing. Analysis of variance indicated that there were no significant differences between the SASRA regulations, challenges and ROA F = 0.034, P = 0.967; p > 0.05. The study thus did not reject the null hypothesis. These findings may be useful to managers and other stakeholders of SACCOs in considering licensing by SASRA and its challenges on financial performance.