Professional Documents
Culture Documents
BEATRICE K. MORWABE
JKUAT.
2019
1
Declaration
This proposal is my original work and has never been submitted to any university for any
academic credit.
SIGNATURE DATE
This proposal was submitted for examination with my authority as the university supervisor
SIGNATURE DATE
i
Acknowledgement
I thank the Almighty God for the unceasing blessings which He has bestowed upon me without
which it is impossible to accomplish anything, secondly, to my family for their moral and
financial support and encouragement. Finally I would like to thank my supervisor, Prof .Willy
Muturi who dedicated his time and effort on my work .He has inspired me to look at things
critically.
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TABLE OF CONTENTS
Declaration.................................................................................................................................................... i
Acknowledgement ....................................................................................................................................... ii
TABLE OF CONTENTS .......................................................................................................................... iii
List of Figures.............................................................................................................................................. v
Acronyms and Abbreviations ................................................................................................................... vi
Definition of Terms .................................................................................................................................... vi
Abstract..................................................................................................................................................... viii
CHAPTER ONE ......................................................................................................................................... 1
INTRODUCTION....................................................................................................................................... 1
1.1 Background of Study ........................................................................................................................ 1
1.1.1 Organization and Management of SACCOs in Kenya................................................................. 2
1.1.2 Performance Measures ................................................................................................................. 4
1.2 Statement of the Problem ................................................................................................................. 6
1.3 Objective of study ............................................................................................................................. 7
1.3.1 General objective of study ........................................................................................................... 7
1.3.2 Specific objectives of study ......................................................................................................... 7
1.4 Research Hypotheses ........................................................................................................................ 7
1.5 Justification of the Study .................................................................................................................. 8
CHAPTER TWO ........................................................................................................................................ 9
LITERATURE REVIEW .......................................................................................................................... 9
2.0 Introduction ....................................................................................................................................... 9
2.1 Theoretical Literature Review ......................................................................................................... 9
2.1.1 Keynesian Theory of Investment ................................................................................................. 9
2.1.2Tobias “Q” theory of investment ................................................................................................ 10
2.1.3 Odd Lot Theory of Investment................................................................................................... 10
2.1.4 Modern Financial Portfolio theory ............................................................................................. 11
2.2 Empirical Literature Review ......................................................................................................... 12
2.2.1 Investment Decisions in SACCOs ............................................................................................. 12
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2.4 Summary of the Conceptual Framework ..................................................................................... 19
CHAPTER THREE .................................................................................................................................. 21
RESEARCH METHODOLOGY ............................................................................................................ 21
3.0 Introduction ..................................................................................................................................... 21
3.1 Research Design .............................................................................................................................. 21
3.2 Population of Study......................................................................................................................... 21
3.3 Data Collection ................................................................................................................................ 21
3.4 Data Analysis and Presentation ..................................................................................................... 22
3.4.1 Model Equations ........................................................................................................................ 22
REFERENCES .......................................................................................................................................... 24
iv
List of Figures
Figures Page
v
Acronyms and Abbreviations
vi
Definition of Terms
Security Market- This is where securities are bought and sold in the basis of demand and
supply. These securities include debentures stocks, shares or any marketable instrument
(Avadhani, 2009).
Fixed Deposit Accounts-This is an investment account that requires a fixed amount of money to
be invested for a fixed period at a fixed rate of interest. It provides investors higher interest rate
Government Securities- These are securities used by the government to borrow money from the
public when its money falls short of public spending needs. In Kenya they include treasury bills
and bonds
Real Estate- This means the physical property such as land and anything immovable attached to
it
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Abstract
The research work will seek to investigate effect of investment decisions on financial
performance of Deposit taking savings and credit cooperative societies in Nairobi County, Kenya
for the period 2014-2018. This is due to the poor performance witnessed as a result of interest
rate cap and low investment Levels. This study will consider the following four objects; To
assess the effect of real estate investment on financial performance of DT-SACCOs within
DT- SACCOs within Nairobi, to examine the effect if investment in government securities on
financial performance of DT-SACCOs within Nairobi and lastly to establish the effect in fixed
deposit account investment on financial performance of DT- SACCOs within Nairobi, ROA will
be used as a measure for financial performance. Descriptive research design for a time series
data will adopted on all 43 DT- SACCOs within Nairobi using a census technique. Secondary
data will be collected from the published financial statements prepared in accordance with the
International Financial Reporting Standards. Simple multivariate will be employed in data, Karl
Pearson correlation coefficient will be to determine correlation within variables .Results will be
generated by use of Statistical package for social sciences. Multiple regression model will be
used to test the relationship between independent variables and depended variable.
viii
CHAPTER ONE
INTRODUCTION
depositors and borrowers. This sector also extends financial assistance to customers, mainly the
poor who are its target group (Karagu & Okibo, 2014). Towards this achievement, cooperatives
perform three main activities that include receipt of savings from members, issuance of credit to
help them better their living standards and advice to members on where and when to invest for
better utilization of the borrowed credit, which should be directed with respect to the progression
In Kenya, cooperatives have gone through two critical cycles, state control period and economic
liberalization era. State control period which elucidates the origin and growth of cooperatives
and it enhanced the government’s social economic policies, which were later interfered with state
1990s with the argument that the success of cooperatives relied on the market principles that
included effectiveness and efficiency, integrity, innovation and Focus on customers. Later, new
policies, which could enable self-controlled and democratically organized co-operatives, were
Essentially, cooperatives were created to contain poverty, but ever since the government started
dominating in its management by coming up with legal provisions, its real intended purpose has
been assumed, the real targeted members have taken over the passive role. Ensuring genuine
membership and management by members can bring back the intended purpose of poverty
1
alleviation (Sizya, 2001). In addition, getting to the solution on how to improve members’ living
standards is important (Gunga, 2013). In ensuring the viability of cooperatives Stalebrink and
Sacco (2006) have championed the need to secure the principle of maintaining sufficient
liquidity levels to cater for current obligations and producing investment income equal to market
yields.
Members’ savings are the major source of funds in SACCOs which are used by SACCOs in
various investments such as loan to members, financial and liquid investments. While
undertaking all these investments managers should ensure safety and good returns for their
money (Mwangi, 2013). Mwakajumilo (2011) Investment decisions by experts are particularly
important since they add value to cooperatives credibility rating by the agencies, which play the
much needed intermediating role. Badertscher et al, (2013) observe that investment experts are
better positioned in advising customers on what to invest due to projects irreversible nature and
have suggested that an investment should be undertaken when the cost of postponing the project
provide credit to the members unlike commercial banks whose main objective is shareholders
returns; difference between the two is owner-customer relationship. For SACCOs, depositors are
the shareholders contrary to commercial banks where those with banks’ shares are the
The “democratic member control” principle creates a unique structure in SACCOs as owners and
members control it and this has always generated the agency problem (Munene & Makori, 2013).
2
Administratively, SACCOs are under the Ministry of Industrialization and Enterprise
Development, the current basis of Sacco’s formation and management is derived from the
guidelines in the Cooperative Societies Act of 2004 whose origin can be traced in the 1966
cooperative society cap 490 formerly Cap 287 of 1945 which were later amended in 1997 Act
No 12 where cooperatives were liberalized by sessional paper No 6 where the cooperatives had
to change their way of doing things to profit enterprises (Wanyama, 2016). Saccos are required
to operate under by laws set by the cooperatives and rules set by ministry (Gichungwa, 2009)
In Kenya, the SACCO subsector encompasses non-deposit taking SACCOs (Non DTs) registered
under the cooperative services act 490 and deposit taking licensed and supervised under Sacco
society Act 2008. (Gweyi & Karanja 2014). SASRA is mandated to look into the structure and
conduct of SACCOs. SACCOs especially those with front office service areas are virtually banks
by the nature of their services. Because SACCOs provide credit facilities, by law, they are
required to comply with prudential guidelines provided by Kenya’s’ Central Bank (CBK)
(Mwangi, 2015; Wambua, 2017). SACCOs are important in pulling and accessing credit at
prevailing interest rate(s) (Auka & Mwangi, 2013). Abadi et,al (2017) have argued that voluntary
savings is particularly important but is affected by a range factors that are not limited to age,
education level, marital status, number of dependents and period of membership in a given
equality, openness, democracy accountability transparency and efficiency (Duncan et al., 2015)
while common challenges involve capital inadequacies and governance-related issues (Karanja,
3
1.1.2 Performance Measures
Performance measures reflect the extent in which an activity has been accomplished by
maintaining quality. It is also a measure of how efficient the firm has employed its scarce
resources to come up with gains (Kiaritha, 2015). This measure shows if an institution has made
use of its assets efficiently to create revenue which enhances soundness of a firm. Some of the
financial measures include; net interest margin, return on equity and return on assets (Nyathira,
2012).
Profitability ratios are used to measure the profitability of organizations. They measure the
returns an institution makes during a certain financial period. These ratios are of great
importance to shareholders and even creditors. To creditors it serves as a measure of whether the
institution will honor the interest rate obligations and shareholders can tell how profitable the
resources they invested with them are. The three mentioned ratios are the best in measuring
ROA measures the a company’s returns after taxes as a percentage of a company’s total asset.it
shows to what extent the company generated its profits by use of its assets. Great values indicate
positive returns on investment which shows efficient performance. This ratio indicates the
Net Income
4
ROA= Total Value of Assets
ROE is used to postulate the company’s performance by computing the percentage of net income
to owners’ equity. It indicates how effective the management utilized the investors’ resources
(Griffin, 1997). Higher values of depict higher profits achieved by an organization. They indicate
how efficient the company has used investor’s capital to generate profits.
Net Income
ROE=
NIM scales the discrepancy between that which the firms pay to their depositors and what the
theys gets from its creditors. Institutions charge slightly high interests rates to borrowers and
give lower rates to its depositors. It relative to interest bearing assets for the simple reason that
the funds are generated through borrowing and lending (Pasiounas, 2006). NIM indicates the
discrepancy in interest income earned on loan and interest cost spent on the borrowed assets.
High NIM indicates high gains; this may not be so health to an organization as this may imply
NIM =
5
1.2 Statement of the Problem
The enactment of interest rate capping into law however with the good intentions intended has
resulted to a chain of events in Kenya’s economy. The Kenya Bankers Association has at many
times voiced the worries on the impacts of the new laws set pertaining lending to its customers.
The set maximum of 14 percent which is 4 percent above the central l bank rate is argued that it
doesn’t serve well as the appropriate reward for the default risk of the borrowers. However no
change has been made and banks are operating under the set minimums. This has attracted
customers as the loans are cheaper in comparison to the previous years before interest rate
capping the law came to pass. Banks have responded by adding fees and other charges which
were not restricted to cover their cost (Kemboi, 2018). SACCOs were in a position to advance
loans charging a low interest rate in comparison to other financial providers and this immensely
attracted customers resulting to better gains (Kinyuira, 2014). The competition with banks was
intensified by interest capping where more customers opted for banks which had taken the
advantage of non -price competitive tools such as speedy and convenience in their services as a
way of enticing the SACCO members hence creating a low customer base for Saccos. To ensure
that they are financially stable, they have opted for some investments decisions (Muli & Musau
2016). However it’s not clear which of these investment decisions drive the SACCOs to achieve
the desired financial performance, research on the same has been scanty evoking the study.
Muli & Musau 2016 conducted a research on the impact posed on financial performance of
SACCOs in Kenya by the investment decisions; the study revealed that decisions on investment
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between investment in treasury bills and bonds, properties and return on assets. This study will
The general objective of the study is to assess the effects of investment decisions on financial
Kenya
SACCOs in Kenya
in Kenya
DT-SACCOs in Kenya.
7
3. Ho: There is no significant effect on investment in fixed deposit account on financial
of DT-SACCOs s in Kenya.
To SACCOs’ management- It will equip the management with knowledge on better investment
opportunities that it can engage in for better performance. It will improve their decision making
To the Government – Sacco’s main objective is to intensify optional savings between members
on addition to credit provision at a lessor interest rate. This research will shed more light on
efficiency utilization of resources in these cooperatives, the government will get to know how
To academic researchers and scholars – There are fairly little research on this field, this research
will shed provide researchers with knowledge on the similar field or a related field.
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CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
The chapter delineates the theoretical literature review in line with theories on investment
decisions from different scholars. It extends to look at the empirical literature review and closes
up with a summary of the literature review. The chapter begins with 2.1 Theoretical literature 2.2
the empirical literature 2.3 conceptual framework and finally 2.4 Summary on the literature
review
It contains theories on investment decisions concept, they include 2.2.1 Keynesian theory of
investment 2.2.2 Tobin’ Q theory of investment 2.2.3 Modern Portfolio theory 2.2.4 Odd-Lot
theory
The Keynesian investment theory was developed by Maynard Keynes in 1936. It posits that
investment is driven by interest rate and Marginal efficiency of capital (MEC) (Arrow, 2017).
MEC is the discount rate which could make the present value from expected returns of a capital
asset equal to the price of supply. It is used in ranking projects from the most viable to the least.
The MEC rule is to accept projects on condition that MEC exceeds interest rate. Low interest
rates attract investments as firms can borrow at low rates since savings will only give low returns
(Fuller, 2013).
Firms have a target of maximizing returns; this is possible by considering suitable investments
due to their irreversible nature (Arrow, 2017).Marginal efficiency of capital decrease with the
level of investment; this is because most of the projects with great opportunities are given a first
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hand at the earlier stages. The theory has been criticized in its consideration of supply price as an
ex-ante decision; this is untrue as it requires an investor to have knowledge on the other
investors’ intentions in the industry to be aware of the supply price (Chick, 2002) The theory will
be important in this theory guiding SACCOs on the best time to borrow and invest or when to
deposit their money and postpone their investment until its profitable.
This theory was developed by Tobins in 1969; it posits that investment should be made only if
the average ‘Q’ is greater or equal to one, (Eklund, 2013). Average Q is the ratio between market
value of assets and its replacement value. At the equilibrium point Q is expected to be zero
suggesting that installation cost of capital is equal to the replacement value of capital. When the
market value surpasses that of the company’s assets Q becomes greater than one showing that
the assets are worth more than the price they paid for and this encourages investment thus firms
will issue there shares. If Q is less than one this discourages investment as the market value is
less that the unmeasured assets of the company indicating undervaluation of assets hence the
assets wont earn better returns (Yoshikawa, 1980).This theory is critiqued because of difficulties
in arriving at Q, is only the average Q that can be easily computed (Muli, 2016). The theory will
be of benefit in this research as it will be used in comparison of amount invested and the
Odd lot is the amount of security less the nominal unit; unlike round lots traded in multiple of
100 these stocks are below 100 shares of stock. They are thought to raise from traders with little
knowledge on the market movements hence the sale (O'Hara et al., 2012). The lot theory posits
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that poor marketing timing by these odd lotters lenders their investment decisions poor. They
purchase stocks when their prices are almost at the higher end and make sales when the prices hit
almost the bottom of the market. It deals with buy and sale signals and due to market variation
it’s a dynamic analysis (Kewley & Stevenson, 1967). According to this theory, increased
purchases cause prices to go down. Conversely if a good selling activity comes on odd lotters
way together with high purchasing activity prices will respond positively (Kewley & Stevenson,
1969). This theory will be important in the this research as it geared towards determining the best
The theory was suggested by Harry Markowitz in 1959, it states that investor’s choice of
portfolio is geared towards maximization of returns for a given risk, he came up with a given set
of assets and the risk attached, standard deviation of expected return is the is the measure of
portfolio risk (Markowitz, 1991). Risk tolerance levels differ from one investor to the other and
this triggers different choice on set of assets to invest in (Cardozo, 1985).It is the return level that
motivates the investors on which risk to bear. Choice of different assets within the efficient
frontiers bearing different risks is a way of diversifying the risks involved. Contributions from
each portfolio are aggregated to come up with the total portfolio (Ball, 1969). Each asset
provides a certain expected future return depending on the risk involved (Gold, 1995). The mix
of assets depends on the managers’ risk accommodation; this affects their diversification which
Wallen Buffet challenges this theory arguing that, great returns can be as a result of managerial
skills rather than the investment skills or a combination of both(Rani, 2012). Treasury bills are
less riskier, stocks are at least as riskier as bonds; real estate is riskier than the fixed deposit
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account. This theory will shed light on the asset choice in minimization of investment risk; this
There are limited researches on effect of investment decisions on financial performance of DT-
SACCOs Kenya, most of them have leaned towards other areas in relation to financial
performance. Most scholars have based their research on determinants of financial performance
of SACCOS. This section will focus on empirical studies that have established how investment
Investors should be informed of the reward and risks associated with any kind of investment they
could wish to venture .The risk nature of different individuals contribute to the nature of project
chosen, high expected future returns are associated with greater risks and the opposite holds.
Before settling on any investment decision wide knowledge on the same can minimize losses. It
should take sufficient time to learn effective investment, alternatives if any, choice of the
investment and finally monitoring and managing them. Management should work towards value
investment, cooperatives with financial slack could invest in almost all viable opportunities and
those without could only take some up (Myers & Majluf, 1984).
Members’ savings is the major source of fund for SACCOs, the management should ensure safe
custody of the depositors’ money and meet the obligation of giving back to the depositors when
need and reward of interest rate for the use of their money in their operations. These funds are
investments and liquid investment. While choosing on where to invest the embers funds
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managers should consider liquidity safety and returns to be generated (Mwangi, 2013). Some of
the investment strategies include investment in government securities, investment in real estate,
One way of acquiring extra revenue in SACCOs is through government lending where these
cooperatives purchase bills and bonds from the government, Treasury bills are loans extended to
the government for a period of one year or less that attracts an interest rate, treasury bonds are
equally issued by the government to raise money, they are long term investments over a year. It’s
a nice investment as it attracts passive income with no much effort (Korir, 2015). These
securities are located at the lowest risk spectrum because of the low credit risk or virtually zero
risk associated with them. The central bank of Kenya controls issuance of these securities to
ensure that they aren’t fragmented in the market (Nyawata, 2012). Purchase of bills and bonds as
a way of lending to the government has been considered an effective investment by SACCOs.
It’s imperative to get a deeper understanding on how this investment works and due to risk
involved diversification is a health way to go (Kipkorir et al., 2016). Treasury bills are offered at
a lower rate than the nominal rate this implies that investors benefit from the discount received.
These bills are not traded in the Nairobi securities exchange but can be used as collateral when
commercial banks in Kenya. Expository research design was employed in the study to enable
give an explanation on the causal relationship between independent variables and dependent
variable. A total number of 40 commercial banks was used as study sample. Both secondary and
primary data was used in the study. Data collected was analyzed using explanatory and
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inferential statistical. Inferential statistics were done through ANOVA and multiple regression
analysis. The study revealed that there was a significant relationship between government
securities, insurance investment, real estate investment, buying of shares had a significant
relationship financial performance of commercial banks in Kenya. The study advocated for
purchase of shares as the best investment followed by real estate investment, insurance
Real estate investment decision has turned to be very crucial due to its ability to plough back
sufficient returns that can help SACCOs stand financial surges. These portfolios can be tangibles
such as machinery or real estates, intangibles such as good will. Most of the Sacco’s investments
have leaned toward real estate; this is due to its ability to give back appropriate returns.
Performance of SACCOs can be derived from its total assets; increased assets in the cooperatives
can translate to better decisions on the projects undertaken. Gains from the investments give
birth to institutional capital as a result of retained surpluses of SACCOs (Kipkorir et al., 2016).
Real assets are heterogeneous in nature, their prices vary as a result of locational convenience,
Investors should be concerned with the risks attached to this investment; they should review
gains and risks in connection to the portfolio choice .Expected return is in relation to the risks
levels, lower risks attract less returns. Well informed investors on the risk features of the real
estate of interest are in a good position to understand the risk nature of the investment. Risk
return tradeoff should be given an upper hand (Kim & Mattila, 2002).
Kipkorir et al. (2013) studied on influence of investment decisions on the financial performance
of registered of SACCOs in Baringo County. The study focused on influence of Front Office
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Service Activities (FOSA), lending to SACCO members, investment in government securities
and investment in bonds on financial performance of the registered Sacco’s. A descriptive survey
design was used targeting 316 members from the 73 registers Sacco. Stratified sampling was in
coming up with a sample size of 177 correspondents. Questionnaires were used to collect data
and analyzed by both descriptive and inferential statistics. The study indicated that the above
factors had a perfect influence on performance of Sacco’s with FOSA taking lead followed by
lending to members than lending to the government and finally investment in real estate.
Odhiambo (2015) examined the effects of real estate finance on financial performance of listed
commercial banks in Kenya. Information from nine listed banks was collected for a period of 5
years, panel data analysis was used on the collected data. The results established that real estate
finance did not have a significant effect on financial performance of listed commercial banks in
Kenya. Some other factors such as market structure, cost of bank operations, foreign ownership
and size had a significant effect on bank performance. The study concluded that real estate
Companies issue shares to raise capital and purchase of those equities means you are entitled to a
say in that company, this gives a chance for part-ownership. Investors purchase these shares with
the hope of company thriving in its activities. Bonds are used as debt instrument whereas shares
derive the ownership. Companies issue shares in case of financial bulge. These companies are
required to take with them the shareholders interest at hand. The main goal should be striving to
achieve value maximization hence any project undertaken by the financial management is
15
Al-Halalmeh & Sayah (2010) studied on the impact of foreign direct investment on share market
value in Ammanan exchange market. Primary data was collected by use of questionnaires. The
results indicated a significant effect t on the share market value .As per the outcome it was
concluded that foreign direct investment are imperative in share price in the exchange market,
Investment in common interest account is the most stable and risk free kind of investment. Being
safe they attract low interest rates hence low return. The only problem with this type of
investment is the fact that the cash deposited only yields low (Selin, 2016).
Mella (2016) studied on the effect of real estate investment on the financial performance of
pension funds in Kenya. A descriptive survey research design was used; all pension funds that
had been directed towards real estate investment were part of the study, making a sum of 48 by
Dec 2015.Multiple regression model was used in data analysis. The study revealed that real
estate investment had a positive significant effect on Return on equity. Offshore investments
positively influence pension funds’ performance as international investments increase the returns
although in a small percentage. Government securities and fixed income have a very strong
positive relationship with performance of pension funds this is due to their liquid nature hence
attracting low returns as a result of low risk attached to them and their susceptibility to inflation.
Equity had a negative influence on performance of pension funds as they are too risky and
performed poorly during the study period. The study recommended that most of the pension
funds should be directed towards real estate investment due to its high returns; they are less
volatile and offer stable cash flow and are best when it comes to diversification of the portfolio,
the study was however prone to some limitations such as; the value of property investment keeps
changing over the years hence a five year period might not reflect the effects of real estate
16
investment on financial performance for a longer period could be useful as will capture different
A Conceptual Framework describes the relationship that exists between the variables. The study
attempts to distinguish the effects of investment decisions on financial performance, it shows the
17
Independent Variables Dependent Variable
securities
Financial performance
(ROA)
Investment in Fixed Deposit Account
account
account
18
2.4 Summary of the Conceptual Framework
The study looked at odd lot theory which indicates that sale of bonds by small traders can be as a
result of lack of information on the market trend resulting to low returns and this can be the best
time for the purchase in order to take advantage of the future when their prices will be high. It
should not be considered so all the time as these traders sell off the bonds due to future market
information. The second theory is the accelerator theory of investment which explains why
increase in demand in consumer goods creates a greater demand for capital goods, this shows
that investment increases when output increase this means investment does not only depend on
income but also increase in sales. If investments is high but not increasing this means there is
zero investment, to increase investment output has to grow by an increasing rate. This theory will
help SACCOs learn of growth that will better their performance. The next theory is the financial
portfolio theory that shows how best firms invest in different assets within the frontier line, this
will help in spreading risk to minimize losses s during investment and the last theory looked at is
the agency cost theory which comes as result of agency and principle relationship which calls for
viable projects due to monitoring. All these theories have shed light on when to invest or how to
hedge risks but have not provided us with an explanation on specific investments and their
On the literature review only few studies have been conducted on the same (Kipkorir, 2013;
Karagu, 2014) Found that investment decisions had a significant influence on financial
performance of SACCOs. Nyambere, (2013) discovered that risk management had an influence
on SACCOs performance, adequate credit policy results could result to high performance.
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Okwee (2011) found out that cooperative governance noncompliance with cooperate governance
contributed to poor performance of the SACCOs. There are few studies on this area hence
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
The chapter covers the overall methodology to be used in the research conduct. Its sections are in
this order 3.3 Research design 3.3 Study population target population 3.4 Sampling 3.5 Data
collection 3.6 Data analysis and presentation 3.7 Data validity and reliability.
The research design is aimed at coming up with answers to the research questions, it entails laid
down strategies to arrive at the answers (Papa & Silva, 2016). Descriptive research design will
be employed in the study. Descriptive research describes the specific phenomena used in a
research and in this it will be used to describe real estate investment, investment in government
bonds and bills, investment in fixed account and investment in security market in relation to
financial performance. It will reveal the causes and effects of variables under study (Blessings,
1998).
population will comprise all the 43 registered SACCOs within Nairobi as per the SASRA report
(2019).
The study will review secondary data for a period of five years for each investment decision.
Data will be collected from the published financial reports of specific SACCOs prepared in
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3.4 Data Analysis and Presentation
Multivariate analysis will be adopted in analyzing data to help come up with the relationship
between decisions on investment and financial performance of SACCOs. Karl Pearson
Correlation coefficient will be adopted to indicate the strength of the relationship. The results
will be arrived at by use of statistical package for social sciences and multiple financial
performance is the dependent variable while investment decisions are the independent variables.
Multiple regression analysis will be used. Performance of SACCOs will be looked at with a close
monitor on the effects of the independent variable hence the regression model will take the form
below
Y=β0+ β1 X1 + β2 X2+ β3 X3 + β4 X4 + α
Β0 = Constant variable
α= Error term
No Multicollinearity which will be tested using the Variance of Inflation Factor (VIF), using the
thumb rule if VIF is less than 4, no problem exists with multicolinearity. VIF greater than 10
implies a serious problem which can be solved by centering data. Scatter plots will be used to
check for homoscedasticity as the second assumption, the third assumption which is linearity will
22
be tested by use of the F test and finally Multivariate normality will be checked using the
Analysis of Variation (ANOVA) and Z test will be used to show the significance of the
independent variables.
23
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