Financial management practices and sustainability of deposit-taking savings and credit cooperative societies in Kenya

Abstract

In Kenya, the financial sustainability of many deposit-taking Savings and Credit Cooperative Societies (SACCOs) remains a major concern, with some institutions, such as Ekeza SACCO, collapsing, and others struggling to meet capital adequacy requirements. These challenges threaten the sector’s ability to contribute effectively to economic development. This study aimed to examine the effect of financial management practices on the sustainability of deposit-taking SACCOs in Kenya. Specifically, it investigated the influence of liquidity management, financial reporting, risk management, and investment decision-making on financial sustainability. The study adopted a causal research design, targeting all 176 licensed deposit-taking SACCOs in Kenya. Finance managers from each SACCO participated in a census survey. Primary data were collected using structured questionnaires and analyzed using SPSS. Descriptive statistics and multiple regression analysis were employed, alongside diagnostic tests for normality, multicollinearity, and linearity. The results showed that all four financial management practices had a statistically significant and positive effect on sustainability (p < 0.05). Liquidity management had the strongest influence (β = 0.732), followed by financial reporting (β = 0.512), risk management (β = 0.417), and investment decision-making (β = 0.366). The study concluded that the financial sustainability of SACCOs depends on a coordinated approach to financial management. It recommended that SACCOs strengthen their financial practices by adopting integrated strategies that promote transparency, accountability, and risk awareness to enhance resilience and member trust.