Abstract: Financial intermediation is an institution that facilitates the channeling of funds between Lenders and borrowers indirectly. That is, savers (lenders) give funds to an intermediation institution (such as a bank), and that institution gives those funds to spenders (borrowers). There have been growing concerns over the financial soundness of some Sacco’s in Kiambu County with a few having collapsed in the recent past. Recent developments in the subsector may point to intermediation. This includes a sustained increase in SACCO lending rates accompanied by a loss of customer base. The study examined the factors influencing financial intermediation of saving and credit co-operative societies in Kiambu County. Focusing on Capital adequacy, asset quality, liquidity, diversification as the main variable. The research adopted descriptive research design with census technique the target population of the study is 42 SACCOS registered in Kiambu County. Data were collected with a questionnaire and were analyzed with SPSS version 24.00 then the results were presented in graphs and tables. The finding established that capital adequacy (β1 = 0.097, p< 0.05), liquidity (β2= 0.237, p< 0.05), asset quality (β3= 0.246, p< 0.05) and income diversification (β4 = 0.407, p< 0.05) had a positive and significant effect on financial intermediation. Therefore, manager of deposit-taking Sacco’s in Kenya must hold enough capital as it is an enhancer of financial intermediation. Also, the management should effectively manage credit risk to ensure that there are adequate levels of liquidity to meet current needs when they are due. Moreover, efforts should be on ensuring that the agency problem between shareholders and management is minimized to have lower levels of non-performing assets. Finally, it is recommended for Sacco’s to expand their resources within their existing business lines where they possess distinctive comparative advantages.
Keywords: Asset quality, Capital Adequacy, Data Envelopment Analysis, Financial intermediation.
Title: FACTORS INFLUENCING FINANCIAL INTERMEDIATION OF SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN KIAMBU COUNTY
Author: Harun Kaniaru Nyakahora, Dr. Muchelule Yusuf
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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