Effect Of Income Source Diversification on Financial Performance of Deposit Taking Savings and Credit Cooperative Societies In Nairobi County

Abstract

SACCO industry has experienced growth that has increasingly brought competition and this has made a number of SACCOs to diversify their sources of income thus bringing to question the impact of such diversification on the performance of SACCOs. This study was carried out with an aim to analyse the effect of income source diversification on the financial performance of SACCOs. Specifically, the study focused on the effect of service charges, sale/lease of assets and other sources of non-interest income on financial performance of deposit taking SACCOs in Kenya. The study used descriptive study design and targeted a population of 36 licensed deposit taking SACCOS in Nairobi County. The sample of the study was 100 respondents selected from 5 SACCOs. Purposive sampling was used to collect data from the unit of the study who are the managers in the SACCOs. The study used questionnaire method to collect data from the respondents with the questionnaire piloted before data collection to test for reliability and validity. Data collected was analysed through SPSS through the use of Pearson correlation and ordinal regression. The data analysed was pres00ented through tables, frequencies charts, graphs and frequencies. The study findings indicated that there is no significant relationship between service fees and financial performance of SACCOs. The study findings further revealed that sales/lease of assets and other non-interest income has significant relationship with financial performance of SACCOs. The study results indicated that 44.1% of the changes in financial performance of SACCOs can be attributed to service fees, sale/lease of assets and other sources of noninterest income. The study concludes that sales and lease of assets and other non-interest income affect financial performance of SACCOs. The study recommends that SACCOS should increasingly diversify their income source to sale/lease of assets and other non-interest income.