| dc.description.abstract | Savings and Credit Co-operative Societies (SACCOs) are critical players in providing affordable credit to over one billion people worldwide, either directly or indirectly. As the second most popular type of co-operatives after those that are agricultural-oriented, statistics indicate that 300 leading SACCOs have revenues in excess of USD1.6 trillion. In Africa, SACCOs‟ loan portfolio has grown at an average of 12%, lower than 35%around 2007. Kenya is second amongst African countries with respect to uptake of SACCO products. Records show over 4.97million direct beneficiary-members use SACCO financial services but this has dropped from 12.9% in 2016 to 11.3% in 2019. Informal Financial Groupings (IFGs) are financial models presenting financial products and services premised on traditionally unwritten social norms and practices. While the popularity of IFGs have led to their collaborations with banks and micro finance institutions, existing literature focuses much on the mutual gains accruing to the two entities but not the trends of members‟ socio-financial practices. Little is known on the effect of the practices of the IFGs subscribing to SACCO membership on the growth of the latter. This study sought to determine the effect of IFGs‟ practices on growth of SACCOs in Kenya. Specifically, the study sought to establish the association between IFGs‟ practices and growth of SACCOs, establish effect of IFGs‟ practices on member loan volumes and determine effect of IFGs‟ practices on deposits. The study was grounded on the postulates of behavioral finance theory and the social capital theory. It adopted a combination of correlation and descriptive research designs. The target population was 512 respondents, comprising of 482 members IFGs that subscribe to corporate membership of SACCOs and 30 SACCOs‟ officials. Primary data was collected using structured questionnaires to IFGs‟ members and SACCOs. Simple random sampling was applied to select a sample size of 224 members of both IFGs and SACCOs. Validity was conducted through expert review, while Cronbach‟s alpha was run to test for instrument reliability with results of 0.748. Data was analyzed using correlation and multiple regression methods, to establish association and effect relationships. From the study results, the first and third hypotheses of the study failed to be accepted and the second hypothesis failed to be rejected. Analysis of findings revealed a generally positive association between IFGs‟ practices and SACCOs‟ growth factors; with credit frequency being significantly positively correlated to loan volumes (r=0.8041, p=0.0000), while savings were positively correlated to deposits (r=0.5147, p=0.0000). Subsequently, multiple regression results provided R2 of 0.339 for effect of IFGs on SACCO loan volumes and 0.376 for effect of IFGs on SACCO deposits. The study concluded that IFG practices are associated with growth of SACCOs and that patronizing group financial products reduces the propensity of members to consume SACCO loans. It is recommended that SACCO‟s should introduce incentive-driven deposit collection strategies targeting IFG members to inspire loans‟ uptake. Further studies may be undertaken to establish the financial implications arising from interactions between IFG-targeting entities such as MFIs and investment banks. | en_US |
