Does Competition from Commercial Banks affect the Financial Performance of Savings and Credit Co-operatives in the Banking Sector in Kenya?

Abstract

Kenya has a long history of co-operative development that has been characterized by strong growth, thus making significant contribution to the economy. Co-operatives are recognized by the government to be a major contributor to national growth and development as they are found in almost all sectors of the economy. Commercial banks in Kenya have staged a stiff competition to the co-operatives through provision of unsecured personal loans. This study sought to establish the effects of the competition from commercial banks on the financial performance of Savings and Credit Co-operatives (SACCOs) in the banking sector in Kenya. This study adopted a descriptive survey design. The target population was co-operatives in the banking sector in Kenya. Stratified sampling and simple random sampling was used to obtain the sample items. A Likert scale questionnaire was used to gather primary information and a secondary data collection sheet was used in gathering secondary information regarding SACCOS’ financial performance. Information was sorted, coded and input into the statistical package for social sciences (SPSS) version 21.0 for production of graphs, tables, descriptive statistics and inferential statistics. The results gave a correlation coefficient of 0.151 with an R-squared value of 0.419, while the ANOVA test gave a p-value of 0.000. The study concluded that there was a positive relationship between competition from commercial banks and the financial performance of SACCOs in the banking sector in Kenya. Further, the study concluded that competition from commercial banks was statistically significant in explaining the financial performance of SACCOs in the banking sector in Kenya. The study recommends that SACCOs should effectively manage competition from banks to improve their financial performance and to further stir up economic growth thus eradicating poverty.