Analysis of the Moderating Effect of DT SACCO Size on the Relationship between Interest Rate Drivers and the Financial Performance of Deposit Taking SACCOs in Kenya
Deposits taking SACCOs (DTS) play a key role in allocating loan products at comparatively lower interest rates to low-and middle-income class in the economy. They achieve their mandate by pooling members’ deposits and occasionally borrowing from external sources for investment in capital projects and to satisfy members’ loan demand. However, most deposit taking SACCOs face challenges in fulfilling their obligation due to variability in the interest rate drivers which negatively affect their financial performance. The influence of monetary policy, inflation, credit and liquidity risks on interest rates in the economy affect interest rate spread in DTS which in turn affect their financial performance. However, little is known regarding the extent to which the DT SACCOs size moderate the relationship between interest rate spread and financial performance. Arising from the fact that the major DTS have reported different financial performance over the recent past, this study purposed to investigate the role of the size of DTS on moderating the relationship between interest rate drivers and financial performance. The study used descriptive survey research. Secondary data ranging from 2013 to 2017 was collected. The data was obtained from 74 DTS which were sampled from 176 DTS using Krejcie and Morgan formula. The output before and after moderation revealed that DT SACCOs size moderated the relationship between interest rate drivers and the financial performance of DT SACCOs. The mean of regression coefficients before moderation was -0.105 which increased after moderation to 0.512. Thus, size of the DTS moderated the relationship between interest rate drivers and financial performancepositively. The study recommended that DT SACCOs should leverage on economies of scale that emanate from size to enhance financial performance of deposit taking SACCOs.
Keywords: Financial Performance, DT SACCO Size, Interest Rate Drivers
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