Abstract:
Despite the existence of SASRA regulation, many SACCOs are still experiencing
challenges due to the inability to manage various risks more efficiently. High costs of
operation, non-performing loans and changes in interest rates are some of the aspects
which have contributed to the deteriorating financial performance of SACCOs in
Kirinyaga County. To overcome the challenges facing SACCOs this study sought to
investigate risk reduction practices adopted by SACCOs in Kirinyaga County to
enhance financial competitiveness. This study was based on the financial theory, Credit
Risk Management theory and the Stewardship theory. The specific objectives of this
study were: to determine the risk prevention practices employed by SACCOs, to
investigate the risk detection practices employed by SACCOs and to determine the risk
control practices employed by the SACCOs in Kirinyaga County. The study adopted
descriptive research design in order to assess the problem under investigation. The study
adopted a census approach to collect information from 23 SACCOs operating in
Kirinyaga County. Primary data was collected from the top management of the
SACCOs using questionnaires. Data collected was analyzed using the Statistical
Package for Social Sciences (SPSS version 21) software. The response rate of the
administered questionnaires stood at 75%. The descriptive statistics utilized in this
study were mean, percentages and standard deviations whereas the inferential statistics
included; ANOVA, multivariate and bi-variate regression and Pearson Correlation. The
study established a positive and significant relationship between the independent
variables; risk prevention practices, risk detection practices and risk control practices
and the dependent variable financial competitiveness of SACCOs within Kirinyaga
County. The coefficient of determination was at 83.1 %, an indicator that the three
explanatory variables explained more than eighty percent of variance in the financial
competitiveness of SACCOs in Kirinyaga County. The p-value and regression
coefficients generated after running the regression model were as follows; for risk
prevention practices (β= 0.471, p= 0.012), risk detection practices (β= 0.251, p=0.037)
and risk control practices (β= 0.376, p= 0.003). The study concluded that risk
prevention practices, risk detection practices and risk control are important in
influencing the financial competitiveness of SACCOs. This study therefore,
recommends the implementation of risk management strategies in all the SACCOs in
order to improve their financial competitiveness. The findings of this study are of
benefit to the practitioners’ in the co-operative sector, policymakers and researchers in
the field of risk management
