Ethnic Diversity and Financial Performance of Deposit-Taking Savings and Credit Co-Operative Societies in Nairobi County, Kenya

Abstract

Purpose: The DT-SACCOs have proved to be important in the development and growth of both individuals and economies. However, the overall financial performance of DT-SACCOs in Kenya has not been impressive. Between 2014 and 2018, there was general decline in return on assets and return on equity of DT-SACCOs. The average return on assets was 2.51% in 2014 and 2.25% in 2018. The average return on equity was 33.09% in 2014 and 21.89% in 2018. The study examined the effect of ethnic diversity on financial performance of Deposit-Taking Savings and Credit Cooperative Societies in Nairobi County. Design/Methodology/Approach: Agency theory, stakeholder theory and resource dependence theory guided this study. Explanatory and correlational research designs were used. Descriptive and inferential analysis was conducted. Findings: Ethnic diversity was found to insignificantly predict return on assets (β2 = -.158; p > 0.05) and return on equity (β2 = -.800; p > 0.05). Implications/Originality/Value: The study concluded that ethnic diversity of board members negatively and insignificantly affects financial performance.