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Abstract:
The study sought to determine the effect of financial innovations on performance of Deposit Taking SACCOs (DTS) in Nairobi City County, Kenya. Most SACCOs in Kenya have sustained huge investment in innovations and training of manpower to handle new technologies. Thus, it remains unclear if adoption of financial innovations has major effect on DTS financial performance. The specific objectives of the study were: to determine the effect of new products, new service process and new organizational form on financial performance, and to determine the moderating effect of firm characteristics on the relationship between financial innovations and performance of DTS in Nairobi City County, Kenya. The target population was licensed DTS in Nairobi City County, Kenya whereas the accessible population was 19 DTS that had been operating and licensed by SASRA between the years 2010 to 2014. Purposive sampling technique was used to pick respondents; the sample size was 76 senior employees though only 68 responded. Primary data was collected using questionnaires while secondary data was obtained from financial statement of the SACCOs. Multiple regression analysis (standard), Hierarchical regression analysis and Descriptive analysis were used to analyse data with the aid of statistical programs SPSS version 21. The study found that new products and new service processes had significant effect on the financial performance while new organizational form had insignificant effect on liquidity and profitability and significant effect on capital adequacy. The study further found that firm characteristics had significant moderating effect on the financial innovations - performance relationship. The study generally concluded that financial innovations greatly influenced performance of SACCOs in Nairobi City County. We further conclude that firm characteristics positively moderate the relationship between financial innovations and performance. The study recommended that the SACCOs to adopt financial innovations strategies to enhance efficiency in all their operations boost profitability and expand their market share focusing on firm characteristics as a competitive advantage.
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