DETERMINANTS OF FINANCIAL PERFORMANCE OF DEPOSIT-TAKING MICROFINANCE INSTITUTIONS AND CO-OPERATIVE SOCITIES THAT HAVE FRONT OFFICE SERVICE ACTIVITIES REGISTERED WITH SASRA

Ongaki K. Belydah () and Dr.Ondigo Herick ()

International Journal of Finance and Accounting, 2016, vol. 1, issue 3, 118 -138

Abstract: Purpose: The study aimed to examine thedeterminants of financial performance of deposit-taking microfinance institutions and co-operative societies that have front office service activities financial performance of portfolios of investment firms in Kenya.Methodology:The research design was descriptive survey. The study used a sample of 11 Sacco FOSAs and 6 DTMs. Secondary data spanning three years (2009 to 2011) was used. A regression model was used to establish determinants of financial performance of deposit-taking microfinance institutions and co-operative societies that have front office service activities financial performance of portfolios of investment firms in Kenya.Results:This study concludes that there is a positive relationship between profit ratio and interest income ratio. Therefore, an increase in interest income ratio by leads to an increase in profit margin. This study concludes that there is a positive relationship between profit ratio and non-interest income ratio. An increase in noninterest income ratio leads to an increase in profit margin. This study concludes that results there are a negative relationship between profit ratio and noninterest expense ratio. An increase in noninterest expense ratio leads to a decrease in profit margin. Regression results indicate that there is a negative relationship between profit ratio and liquidity ratio. An increase in liquidity ratio leads to a decrease in profit margin. Regression results in indicate that there is a positive relationship between profit ratio and asset quality ratio. An increase in asset quality ratio leads to an increase in profit margin. The study concluded that t there is a positive relationship between profit ratio and financing ratio. An increase in asset financing ratio to an increase in profit margin.Policy recommendation:This study recommends that financial institutions should improve the interest income ratio by aggressive marketing their loans products and expanding their market territory. They should also improve non-interest income ratio, non-interest expense ratio, financing ratio, liquidity ratio and asset quality ratio

Keywords: financial performance; front office service; sasra (search for similar items in EconPapers)
Date: 2016
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