Investment in Shares and Financial Performance: Evidence from Deposit Taking Savings and Credit Co-Operative Societies in Kenya
DOI:
https://doi.org/10.53819/81018102t4410Abstract
Deposit taking savings and credit co-operative societies (DT-SACCOs) in Kenya are central to financial inclusion, managing assets exceeding Kshs 900 billion and serving millions of members. Despite growing investment portfolios, their financial performance measured by return on assets has remained volatile, fluctuating from 2.45% in 2016 to a sharp decline of 1.59% in 2021, before recovering to 2.61% in 2022 and declining again to 2.48% in 2023. One investment dimension that has attracted limited empirical attention in the SACCO context is investment in shares. This study assessed the influence of investment in shares on financial performance of deposit taking SACCOs in Kenya. The study was guided by Modern Portfolio Theory and Shiftability Theory. A positivist research philosophy and longitudinal research design were adopted, targeting all 182 SASRA-regulated DT-SACCOs in Kenya over the period 2015 to 2024. Secondary panel data were sourced from SASRA annual reports and audited financial statements. Data analysis employed descriptive statistics, correlation analysis, panel unit root tests, and random effects regression. The findings revealed that investment in shares (D_IS) had a positive but statistically insignificant effect on financial performance (β = 0.0048, t = 0.0828, p = 0.9342). The study concludes that investment in shares does not significantly influence the financial performance of deposit taking SACCOs in Kenya, attributed to modest allocations to equity, irregular dividend income, market price volatility, and regulatory constraints on equity investment. The study recommends that DT-SACCO boards adopt cautious, evidence-based share investment policies with clear risk-return justifications and maximum allocation thresholds, while SASRA should issue clearer regulatory guidance on permissible equity limits.
Keywords: Investment in Shares, Financial Performance, Deposit Taking SACCOs, Return on Assets, Kenya, Modern Portfolio Theory, Shiftability Theory.
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