EFFECT OF SOLVENCY ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING SACCOS IN KENYA

Abstract

The deposit taking SACCOs (DTS) play a vital role in the socioeconomic advancement of countries as they largely use authority they have over the movement of cash from surplus sources to those who need the funds through financial intermediation. However, it has been observed that the daily activities of Deposit taking SACCOs are faced with challenges.  The financial performance of Deposit taking SACCOs in terms of return on asset in Kenya has been declining from the year 2016 to 2020. The main objective of the study was to determine the effectof solvency on financial performance of Deposit taking SACCOs in Kenya. The study was guided by Pecking Order Theory. This study adopted cross sectional research design. The target population was 164 Deposit Taking SACCOs that operated from 2016 to 2020. The sample size was 61 Deposit Taking SACCOs in Kenya which were registered under SASRA. The study adopted stratified random sampling technique. The study employed the use of secondary data which was collected from the published annual financial statements of the Deposit taking SACCOs.  Data was analysed using descriptive statistics and inferential statistics. Descriptive statistics involved mean, standard deviation, minimum and maximum.  Inferential statistics included correlation analysis, panel regression data. The study identified that; solvency had strong positive and highly significant correlation with financial performance of deposit taking savings and credit cooperative societies (SACCOS) in Kenya.