EFFECT OF INVESTMENT IN FINANCIAL PROCESS AUTOMATION ON LOAN PERFORMANCE OF DEPOSIT TAKING SACCOS IN NAIROBI CITY COUNTY, KENYA
DOI:
https://doi.org/10.68715/84eerx51Keywords:
Financial process automation, Investment in automation, Loan performance, Deposit-taking SACCOsAbstract
Purpose of the Study: The purpose of the study was to examine the effect of investment in financial process automation on loan performance among deposit-taking Savings and Credit Cooperative Societies (SACCOs) in Nairobi City County, Kenya. Specifically, the study investigated whether investment in automated financial systems contributes to improved loan portfolio quality and reduced non-performing loans.
Methodology: The study adopted a causal research design and a census approach targeting 49 deposit-taking SACCOs, with two respondents selected from each institution. Of 98 questionnaires distributed, 89 were completed and analysed, yielding a response rate of 90.82%. Secondary loan performance data were obtained from financial statements and regulatory reports. Data were analysed using SPSS Version 28, descriptive statistics, Pearson correlation and multiple linear regression. Hypotheses were tested at the 5% significance level.
Findings: Respondents perceived investment in financial process automation positively, recording an overall mean of 4.11 (SD = 0.77). Cost savings scored highest (M = 4.18), followed by staff training (M = 4.12) and software, hardware, and infrastructure investment (M = 4.02). The average non-performing loans to total loans ratio was 8.62% between 2020 and 2024, exceeding the 5% benchmark. The regression model was statistically significant, F (3, 45) = 17.189, p < .001, explaining 53.4% of the variation in the ratio. Investment in automation had a negative, statistically significant coefficient (β = −0.275, p = .022), indicating an association with lower non-performing loan ratios.
Conclusion: The study concludes that investment in financial process automation is significantly associated with improved loan performance among deposit-taking SACCOs in Nairobi City County, Kenya. SACCO management should prioritise integrated automated systems, adequate infrastructure and continuous staff training. Regulators should encourage shared digital platforms to reduce implementation costs and strengthen loan portfolio management.
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