Relationship Between Firm Size, Sacco Societies Regulatory Authority Compliance, and Loan Performance of Deposit Taking Saccos in Nakuru County, Kenya

Abstract

Abstract Deposit-Taking Savings and Credit Cooperative Societies (DT-SACCOs) play a crucial role in providing financial services to members, particularly through access to credit. However, loan performance remains a critical concern, as high default rates, delayed repayments, and non-performing loans threaten the financial sustainability of these institutions; therefore, the study sought to determine the relationship between firm size, Sacco societies' regulatory authority compliance, and loan performance of deposit-taking Saccos in Nakuru County, Kenya. Specifically, the study sought to assess the effect of financial reporting, liquidity management, governance structure, and capital adequacy and loan performance of DT Saccos in Nakuru County, Kenya, and to assess the moderating effect of firm size, Sacco societies' regulatory authority compliance, and loan performance of deposit-taking Saccos in Nakuru County, Kenya. The study was guided by signaling theory, stakeholder theory, financial intermediation theory, capital structure theory, and resource dependence theory. The study adopted a descriptive research design. The unit of observation was 14 credit officers, 27 internal audit and compliance officers, 12 finance officers, 4 CEO, and 8 operations managers. Given the targeted population, the researcher used census to ensure all respondents were included in the study. The researcher collected primary data using a questionnaire. Before the leading study the researcher conducted a pilot study at Imarisha Sacco in Kericho Town, where 6 questionnaires were distributed to employees in the credit and finance department. Both descriptive and inferential statistics were determined using the Statistical Package for Social Sciences. Data were presented in tables. The findings revealed that financial reporting was positively associated with loan performance among Saccos (β = 0.084, p = 0.047). In addition, the finding indicated that liquidity management exhibited a stronger positive relationship with loan performance (β = 0.380, p = 0.015). Furthermore, the findings revealed that governance structure exhibited a stronger positive relationship with loan performance (β = 0.800, p = 0.003). Finally, the findings showed that capital adequacy exhibited a stronger positive relationship with loan performance (β = 0.118, p = 0.042). Based on the findings, the study concluded that financial reporting, liquidity management, governance structures, and capital adequacy have a statistically significant effect on the loan performance of DT SACCOs in Nakuru County. The study also concluded that the size of the SACCO significantly moderates the relationship between SASRA compliance and loan performance of DT SACCOs in Nakuru County. Based on the findings, the study recommended that SACCOs enhance their internal governance systems by promoting transparency, accountability, and adherence to best management practices. In addition, regulators like SASRA should not only enforce compliance but also support capacity-building initiatives, including training programs to improve financial literacy and reporting skills among SACCO staff.