Influence of Sacco Lending Rates on Dividend Payout Among DT Saccos in Kenya

Abstract

This study explored the influence of sacco lending rates on dividend payout among saccos in Kenya. The study was motivated by inconsistency in the ability of Saccos to live up to their promise of paying dividends to members. There are variabilities in dividend payout based on different sacco sectors. Saccos pay dividends on a different percentage from the previous year. Different saccos have varying rates of interest charged on loans lend to members. The present study targeted all registered DTSSaccos in Kenya (n=179) over an eight-year period (2012-2019). The study used panel data. Descriptive results showed that Sacco Lending interest rates which reflect the capacity of saccos to generate income, which they could distribute as dividends were on a downward trend, between 2012 and 2019 and large scale saccos had highest rates. Indeed, small saccos use dividends as a business strategy to retain and attract new members, thereby augment their capital. The findings from this study are useful to the board of directors and management team of companies in deciding an appropriate lending rate for the company. The results are also useful to shareholders in making investment decisions. The study extends empirical evidence on dividend policy determinants which are currently reported to be inconclusive. In addition, the study fills the lacuna in the existing literature by focusing on the issue of dividend policy determinants in the context of an emerging sector, namely saccos.