Greener Journal of Economics and Accountancy

Open Access

Alecia et al

Greener Journal of  Economics and Accountancy Vol. 3 (1), pp. 009-019, April 2014

 ISSN: 2354-2357 © 2011 Greener Journals

Research Paper

Manuscript Number: 1210131020


Effect of Commercial Bank Loans on Financial Performance of Savings and Credit Co-Operative Societies in Kisumu, Kenya


Alecia, Elizabeth Ochido Okungu1,

Robert Kisavi Mule2Destings Nyongesa3,

Fredrick Onyango Aila*4Dr. Gideon Momanyi5,

Asewe Stephen Ogut6, Dancan Mayieka Onchonga7

Justine Oyagi Omoke8Japhet Korir9,

Michael Munene Muchoki10


1,2,6,7,9,10Department of Accounting & Finance, School of Business and Economics, Maseno University, Private Bag, Maseno, Kenya.

3,5Department of Economics, School of Business and Economics, Maseno University,

Private Bag, Maseno, Kenya.

4,8Department of Marketing and Management, School of Business and Economics,

Maseno University, Private Bag, Maseno, Kenya.


*Corresponding Author’s Email: fredrick.aila @ gmail. com


Savings and credit cooperative societies’ core business is mobilizing savings from members, and then providing them with credit at affordable interest rates. However, SACCOs have received stiff competition from commercial banks, as a result, many SACCO members have moved to borrow from the commercial banks. If this trend continues unchecked, the SACCO societies might collapse. Hence, the need to find out how commercial bank loans have affected the financial performance of Savings and Credit Co-operative societies. The general objective of this study was to investigate the effect of personal loans offered by commercial banks on the financial performance of savings and credit cooperative. The specific objectives of the study were; to determine the effect of commercial bank loans on the savings and lending volumes of SACCOs, to investigate the benefits individual members have gotten from the competition between commercial banks and SACCOs and finally to identify the factors that cause SACCO members to borrow money from other financial institutions. The research adopted a case study design. Data was collected by use of structured questionnaires, to collect primary data. The literature reviewed, published financial statements and reports formed the basis of secondary data. Data was analyzed using descriptive statistics. The study may be of benefit to the management of savings and credit cooperative societies as it highlighted the effect of the loans offered by commercial banks on the growth as well as financial performance of SACCOs. It was found that SACCOs have not been grossly affected by commercial bank loans, since a p value of 0.004 was obtained during the paired t test. This was also confirmed by indicators such as membership, savings and amount of loans granted which increased over the years. It was further established that members benefited from the competition between banks and SACCOs since 45.14% agreed and 6.49% strongly agreed that it was now easier to obtain loans from SACCOs. However 60% of the respondents 
reported that they were limited by the pro rata requirements by the SACCOs. Following these findings, the researcher thus recommended that the government should come up with policies to protect SACCOs and offer equal opportunity for acquiring funds. 

Keywords: Commercial Bank Loans, SACCOs, Repayment Period, Terms of borrowing, Kenya.

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