Financial Sustainability of Sacco’s in Kenya: Challenges and Opportunities .

Abstract

Saving and credit cooperative societies contribute immensely to economic development, alleviation of poverty and unemployment in the developing and developed nations. Despite this contribution, many Saccos have been faced with challenges which may threaten their sustainability and survival. This study sought to investigate the major challenges that have threatened sustainability of Saccos in Kiambu County and propose practical solutions that can be adopted by the Saccos to ensure their survival. Guided by a descriptive survey design the study randomly sampled fifty (50) deposit taking Saccos which formed the basis of investigation. Data was collected with the help of a self- administered questionnaire and analyzed using descriptive statistics. Results showed that among the challenges facing the sampled Saccos, three featured prominently, including competition from other financial institutions such as commercial banks, microfinance institutions, insurance companies and pension provident funds. Majority of the Saccos are struggling with capital inadequacy and poor liquidity management which is fuelled by poor leadership and improper governance structures. To alleviate competition challenges the it is recommended that Saccos should adopt aggressive marketing strategies and diversify their sources of funds. To deal with inadequacy of capital and liquidity management challenges, directors of Saccos should develop and implement effective internal control system to ensure proper control, monitoring and maintainance of proper levels of cash flow in order to address. Dealing with the challenge of poor leadership and governance the study recommends that the directors should adopt good cooperative governance principles with regard to appointment of the board of directors, remuneration and determining their terms of service.