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Research Paper | Finance | Kenya | Volume 9 Issue 3, March 2020

Influence of Cost of Borrowing on Financial Performance of Selected SACCOs in Siaya County

Charles Anyango | Dr. Simeyo Otieno | Dr. Ofwa Joanes Otieno Wu'Adongo

Abstract: The objective of the study was to establish the cost of borrowing on Financial performance of selected SACCOs in Siaya County, Kenya. The study was pegged on credit risk theory and loanable funds theory. This study used cross sectional research design. The target population was 43 SACCOs in Siaya County. This study used cross sectional research design. The target population was 43 SACCOs in Siaya County. A sample size of 39 SACCOs was determined by using Yamane formula (1967). Sampling techniques comprised purposive and simple random sampling. Primary data was gathered by structured questionnaires administered personally by drop and pick approach. The data was analyzed by descriptive statistics such as frequencies and percentages, calculation of means and standard deviations, as well as Pearson correlation and multiple linear regression analysis. The pilot test was conducted on the questionnaire and necessary amendments made to enable respondents answer it without any difficulty. The coefficient of determination calculated, was r2 = 0.293, indicating that about 29.3 per cent of the variation in financial performance was attributed by the cost of borrowing. This means that there was evidence of overlap between the between cost of borrowing on financial performance. The major findings therefore indicated that approximately 29.3 % of the variation in financial performance (profitability) was attributed to variation in cost of borrowing. The study therefore concludes that loans cost of borrowing influences the financial performance of SACCOs. The study recommends that SACCOs to reduce the cost of borrowing so that increase profitability can be realized. Researcher proposes further research to be conducted in banking sector so that to ascertain the influence of lending practices on financial performance in the banking industry in Kisumu County.

Keywords: Savings and Credit Management, Cost of borrowing, Financial performance

Edition: Volume 9 Issue 3, March 2020,

Pages: 1221 - 1226