Front Office Service Activity Products Income and Liquidity of Deposit-Taking Savings and Credit Cooperative Societies in Nairobi City County, Kenya

Abstract

Income from FOSA utility services have also contributed to the liquidity of SACCOs. SACCOs provide utility services such as bill payments, money transfers, and mobile banking services. The provision of these services has attracted more members to the SACCO, increasing their deposit base. The growth in the deposit base has enhanced the liquidity of SACCOs, allowing them to fulfill the financial requirements of their members. Income from FOSA loan products is affected by the high default rates faced by deposit-taking savings and credit cooperative societies in Kenya. Income from FOSA investment products is affected by the risk associated with investment options. Income from FOSA utility services, such as water and electricity bill payments, is affected by the reliability of utility providers. The general objective assessed outcome of the FOSA products’ income on liquidity of deposit taking Sacco’s (DTS). Target population for the study was deposit taking Sacco’s operating within the Nairobi City.  Thus, for the unit of analysis in this study, it include all the deposit taking SACCOs operating within Nairobi City. A total of 34 DTS operate in Nairobi City County. Therefore, the target population which was adopted for this study was 34 firms. The study employed the use of mean and standard deviation as part of descriptive statistics for independent variables, namely income from FOSA loan products, income from FOSA investment products and income from FOSA utility services. Hypotheses were tested at a 5% significance level using multiple regression analysis. The study found that income from FOSA loan products wielded a positive and significant effect on liquidity of DTS (Beta value=0.111, p=0.007) with a minimum of 95% confidence level. Additionally, income from FOSA investment products also has a positive and significant effect on the liquidity of DTS (B=0.275), and p value was 0.004 at minimum of 95% confidence level. The study also found out income from FOSA utility services were found to wield positive and significant effect on liquidity of DTS and it was also found firm wielded negative and significant effect on liquidity of DTS. The recommendations are: SACCOs should comply with the liquidity ratio and consider investing surplus cash in profitable projects to increase income instead of holding excess cash for liquidity. Support for the growth of DTS by creating a favorable environment and enacting supportive legislation. The DTS should continuously review their credit policy framework and implement dynamic credit appraisal processes. Management and policymakers should develop strategies to reduce information asymmetry among various stakeholders. Additionally, management should provide qualitative data and information that can aid decision-making. The SACCOs' board of directors should be regularly updated on the firm's liquidity position and promptly informed of any significant changes in current or projected liquidity. SACCOs should appropriately manage liquidity demand and supply to ensure smooth operations, maintain positive stakeholder relationships, and prevent liquidity issues.

Keywords: Front Office Service Activity Products Income, Liquidity, DT SACCOs