Analysis of equity capital structure financing levels on financial performance: A cross sectional survey of Savings and Credit Co-operative Societies (SACCOS) in Kiambu County, Kenya.

Abstract

SACCO societies have more complex financial structures given their localization of capitalization and liquidity albeit mutual guarantee capital structure. This study sought to analyze the effect of equity capital financing structure levels on financial performance of SACCOs. The study targeted 27 SACCOs in Kikuyu Sub County, Kenya. The study adopted a cross sectional survey research design to capture the opinions of SACCO societies’ owners and/or managers at a specific time. Using stratified purposive sampling technique, 5 SACCOs and 10 key respondents were selected for the study. The study obtained primary data from the key respondents and secondary data from SACCO accounting records for the years 2013 to 2016. Data collected was presented and analyzed qualitatively and quantitatively using content analysis, and regression and analysis of variance (ANOVA) respectively. Based on the results, equity financing varied significantly in the specified period. The SACCOs’ financial performance increased whenever there was a decrease in equity and increase in debt capital levels up to optimal level. The study further revealed that majority of the SACCOs did not employ debt financing in the previous years’ compared to the current period. They significantly relied on members’
deposits and retained earnings as prime sources of capital financing. The study recommends that Sub County co-operative officers should train the central management committee members and executive managers on capital financing strategies with the aim of enhancing effective and reliable financial performance of their SACCO societies.