Financial inclusion and growth of deposit-taking SACCOS in Eastern Region, Kenya

Abstract

Deposit taking Savings and Credit Cooperative Societies have increasingly adopted financial inclusion practices, yet many continue to exhibit poor growth as evidenced by declining membership, assets, loan repayment rates, and operational efficiency. Recent data indicates significant drops in withdrawable deposits, net income, and overall financial performance, compounded by high default rates and non-remitted funds. These trends highlight persistent challenges in leveraging financial inclusion to drive growth. The primary goal of this study was to evaluate the impact of financial inclusion practices on the growth of deposit-taking SACCOs in the Eastern Region of Kenya. Specifically, the study sought to examine the influence of financial literacy, Loan accessibility, digital financial services and branch network on the growth of deposit taking SACCOs in the Eastern Region of Kenya. The study was anchored on the financial inclusion theory as the main theory supported by the financial intermediation theory, and agency theory. The study used an explanatory research design. The respondents were the heads of finance, marketing, operations, and information technology. A total number of 104 management respondents was used in the study. Primary data used was collected using structured questionnaire. Validity and reliability of the data collection instruments were determined before conducting data collection. Data analysis was done using descriptive and inferential statistics with the aid of SPSS. Financial literacy had statistically significant effect on the growth of deposit taking SACCOs (β=.266, P=0.009<0.05). Similarly, loan accessibility had statistically significant effect on the growth of deposit taking SACCOs (β=.216, P=0.007<0.05). Additionally, digital financial services had statistically significant effect on the growth of deposit taking SACCOs in the Eastern region of Kenya (β=0.165, P=0.012<0.05). Further, branch networks had significant effect on the growth of deposit taking SACCOs (β=0.247, P=0.001<0.05. It is recommended that SACCOs should regularly update and customize their financial literacy programs to address evolving financial trends and challenges. Also the management of the deposit- taking SACCOs should continue upholding and improving transparency in loan processing and maintain competitive interest rates. They are recommended to continue investing in modern, user-friendly, and secure digital platforms that cater to the diverse needs of the members. Additionally, SACCOs should expand their physical branch networks in order to expand their market reach.