Financial Regulation and Firms Technical Efficiency: Does Size Matter? A Case of Deposit Taking SACCOs in Kenya

Moses Biwott, Prof Willy Muturi, Dr. Irungu Macharia
2018 Zenodo  
The unprecedented growth of SACCOs in Kenya and its influence on the mainstream financial systems has made the sector a key target for financial regulation. The unique operating principles of SACCOs that limits the adoption of conventional CAMEL-based banking regulatory framework has led to the formulation of SACCOs Societies Act 2008. The implementation of the act started in 2010, and by 2014, all Deposit-taking SACCOs, irrespective of their size were expected to have achieved full compliance.
more » ... ed full compliance. Four years later, a number of SACCOs remain non-compliant with concerns raising over the true influence of the regulations on the performance of the targeted SACCOs. This paper looks at the influence of size as measured by the total assets on the relationship between compliance levels and Technical Efficiency of the SACCOs. A two-stage fixed-effect model was used. Data Envelopment Analysis (DEA) was used to estimate individual SACCO technical efficiency while a moderated fixed effect panel model was used to estimate the influence of size on the relationship between the levels of compliance and technical efficiency. Meeting capital adequacy and investment ratios set out for the SACCO was found to negatively influence the resulting technical efficiency of Deposit Taking SACCOs in Kenya. However, size does not significantly moderate between the levels of compliance and technical efficiency
doi:10.5281/zenodo.3456015 fatcat:anbadfwwtnhtfaligbjbyvqdny