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Research Paper | Finance | Kenya | Volume 6 Issue 9, September 2017

Portfolio Selection, Funds Allocation Strategy and Financial Performance of Deposit Taking Saccos in South Rift Region (Kenya)

John C. Ngeno ^[3] | G ^[20159] | Kingoriah ^[2]

Abstract: The purpose of this paper was to establish the effect of portfolio selection, funds allocation strategy and financial performance of Deposit taking saccos in South Rift Region in Kenya. The research was based on a descriptive survey of CEO, Sectional heads and Board of Directors of DTS. Respondents were ninety-one in number. Portfolio selection is a crucial activity in any firm. If it is chosen haphazardly, it will result in financial loss. Once funds are invested in a given entity, it is irreversible. Any investment decisions need proper evaluation of investment before committing funds to any business enterprise. Funds allocation strategy relates to the duration of investment. It may be tactical or strategic investment depending on the firm preference. It was recommended that DTS should invest in tactical assets. This is a short-term investment. Strategic investment should be a special case. It is a long-term commitment of funds. Return is not realizable in a short period. The two variables influenced financial performance significantly. Data from questionnaires were analyzed using SPSS version 20. The technique used in the study was Multiple regression analysis. Two analyses were carried out. The first one was to done to establish the effect of portfolio selection and financial performance. The study found out that there was a negative relationship in case of loan advanced, liquid investment and non-earning fixed assets and financial performance. However, the relationship between illiquid investment and financial performance had a positive coefficient. The second analysis related to independent, moderating and dependent variables. The coefficients of the regression showed that loan advanced and non-earning fixed assets had negative relationship with financial performance. However, the other three variables had positive relationship with financial performance. The findings indicated that introduction of moderating variable enhanced financial performance significantly. Since, the commencement of deposit taking business, SARSA had delicensed three DTSs in South Rift Region in Kenya. From the study, liquid investment had the highest coefficient. It means that it will enhance financial performance of DTS. Hence, it was recommended that the entity should invest in liquid investments. The investments comprise treasury bills, commercial papers and other marketable securities.

Keywords: Portfolio selection, Funds allocation, Financial performance, Deposit-Taking SACCOs DTSs

Edition: Volume 6 Issue 9, September 2017,

Pages: 2035 - 2042

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