Technical Efficiency of Deposit Taking Savings and Credit Cooperative Societies in Kenya

Abstract

The deposits taking Savings and Credit Cooperative Societies have continued to play a critical role in Kenya’s financial sector in terms of access, savings mobilization and wealth creation. Given the importance of the sector in economic growth, there has been considerable interest in their efficiency. In Kenya, DTS have been reported to have low efficiency, with the average efficiency being less than one. There is limited empirical literature to explain the inefficiency of DTS. In view of this, the study sought to establish the effect of asset quality on efficiency. The study was anchored on Asymmetric Information Theory. The study adopted positivist philosophy and explanatory research design. The target population comprised 110 DTS as at 2017.The study used secondary data that was collected from the audited financial statements for the period 2012-2016.Data was collected using a document review guide. Data Envelopment Analysis methodology was used to generate efficiency scores. The study found that the DTS in Kenya have not achieved efficiency. The study recommends that SASRA should develop a merger policy to encourage the DTS to merge. The management should decrease staff costs and operating expenses by investing in advanced technological innovations in order to increase efficiency.