Effect of Financial Technology Adoption on the Financial Performance of Deposit-Taking Savings and Credit Cooperative Societies (SACCOs) in Kenya (International Journal of Finance)

Summary

• According to the Central Bank of Kenya, SACCO sector return on assets declined from 9.7% in 2023 to 9.2% in 2024.p.6
• SACCO non-performing loans rose from KES 44.4 billion to KES 53.1 billion over the same period.p.6
• The ratio of non-performing loans to gross loans increased to 6.3% in 2024.p.6
• Kenyan commercial banks' ROA fell from approximately 3.04% in 2018 to 2.92% in 2019 and 1.36% in 2020, before recovering to 2.90% in 2021.p.4
• Wekesa found that financial technology had a positive and significant effect on SACCO return on assets (β = 0.162, p = 0.001).p.6
• Ndungu found that ICT adoption explained approximately 56.7% of the variation in SACCO performance.p.9

Key insights

1. Fintech adoption in SACCOs is framed through four dimensions: mobile banking, digital lending, internet banking and automated financial management systems.p.5
2. Empirical studies give mixed results, with internet banking and agency banking significant but mobile banking and ATM services insignificant in one study.p.6
3. In Ghana, commercial banking ROA rose from approximately 2.91% in 2018 to 3.16% in 2019 and 3.23% in 2020, then eased to 3.21% in 2021.p.4
4. Japan's banking ROA declined from approximately 0.184% in 2018 to 0.105% in 2019.p.3
5. One reviewed model jointly explained 91.6% of the variation in SACCO financial performance.p.8
6. Reviewed studies do not examine the four fintech dimensions together, which is the conceptual gap this study addresses.p.10