EFFECT OF BUSINESS MANAGEMENT TRAINING ON FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT CO- OPERATIVE SOCIETIES IN KENYA

Abstract

Savings and Credit Cooperative Societies play an important role in economic development as part of the financial system. In order to increase financial inclusivity and realize Vision 2030, the Kenyan government has introduced favorable legislation to support the cooperative movement in addition, organizations like NITA are now conducting training programs that are aimed at enhancing performance of SACCOs despite these initiatives, high failure rates among Deposit Taking SACCOs have continued to be reported for instance, out of the 176 SACCOs registered by 2016, 12 were licensed to operate on a six months renewable conditional and restricted license where 2 had their licenses revoked having failed to improve in performance. This outcome reveals that there is an information gap relating to the key determinants of performance of Deposit Taking SACCOs. Business management training is reported to be one of the key determinants of performance of SACCOs. Consequently, this study assessed the effect of Business Management Training on Financial Performance among the Deposit Taking SACCOs in Kenya. The study focused on the constructs of Accounting Skills, Entrepreneurship Skills, Financial Management Skills, Marketing Management Skills and Strategic Leadership Skills. The study was underpinned on the Kirk Patrick‟s learning and training evaluation theory, theory of internal control, psychological theory, financial stewardship theory, resource-based theory, Porters theory of competitive advantage and behaviorist learning theory. The study applied both positivist and interpretative philosophical foundations. The study adopted explanatory survey design to achieve research objectives. The target population was 176 licensed Deposit Taking SACCOs registered in Kenya as at 2016. Random sampling technique was used to obtain 74 Deposit Taking SACCOs. From every SACCO, the chief executive officer, finance manager and the internal auditor were selected as respondents. Primary data was collected using structured questionnaires with a likert scale while secondary data collection sheet was used for collecting information concerning SACCOs financial performance. A drop and pick technique were used. Reliability and Validity were conducted to ensure research tools were effective in data collection. Business management training indicators were analyzed using frequencies and percentages while the relationships between business management training and financial performance was analyzed using correlation and regression. The findings of the study showed a significant positive relationship between accounting skills (r=0.403, β=0.288, t=2.095, p=0.038), entrepreneurship skills (r=0.309, β=0.168, t=1.997, p=0.048), financial management skills (r=0.420, β =0.244, t=2.584, p=0.011), marketing skills (r=0.444, β=0.213, t=2.061, p=0.041) and strategic leadership skills (r=0.563, β=0.452, t=4.228, p=0.000) and financial performance. Based on the results of the multiple regressions (adjusted r2=.333, F=14.604 and p=0.000), the five independent variables explained 33.3%of the changes in financial performance. Using ANOVA analysis, it was concluded that all the variables under study were statistically significant determinants of financial performance of SACCOs in Kenya. This study recommends that the SACCOs should put tighter internal controls system for proper business accounts management, hire managers based on an entrepreneurial inclination and set objectives for value maximization to be attained. Future studies in SACCOs should focus on how human and financial resources can be integrated and used as competitive tool to achieve sustainable financial performance. The findings from this study will be useful in the management of SACCOs, policy making, researchers, scholars and investors.