Financial Engineering and Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Kenya.

Abstract

The study explores the effect of financial engineering on financial performance of deposit taking Savings and Credit Co-operative Societies (SACCOs) in Kenya. Population constituted of 163 SACCOs and a sample of 45 was considered. The results depicted that SACCOs have adopted financial engineering practices in three forms: product engineering, process engineering and financial solutions engineering. In terms of their effect on performance, only process engineering was found to have a positive and significant relationship with financial performance. Product engineering and financial solutions engineering were found to have a positive but insignificant relationship was obtained. The study recommends that SACCOS should adopt financial engineering practices so as to improve their performance. More focus should be on process engineering. As such, SACCOs should automate their operations, adopt paperless services, use mobile banking services platform, use electronic funds transfer and install ATMs so as to improve their performance. In terms of control variables, the amount of loans were found to positively and significantly influence financial performance. As such, SACCOs should strive to derive products that can increase their level of loans. Keywords: Financial engineering, Financial performance, SACCOs, Kenya.