Effect of technological development on the performance of SACCOs: a case study of Wazalendo and Nakasero Market SACCOs in Kampala
Abstract
The objective of the study is to establish the effect of technology development on the financial performance of SACCOs. Descriptive research design was used targeting both deposit and non-deposit taking SACCOs in Kampala City which were 19 and 37 respectively. Purposive sampling technique was used in selecting 56 SACCOs and secondary data collected from their financial statements. Descriptive and inferential analysis techniques were used involving mean, standard deviation, median, minimum and maximum values. Inferential analysis through multiple linear regression analysis was also conducted.
The results indicate that an increase in ICT adoption leads to an increase in SACCOs financial performance. Adoption of ICT results to the improvement in payments, processing or reduction in service time due to the new ways to deliver financial services electronically to customers. Besides, Size of the SACCOs has positive effect on the financial performance as large SACCOs generate superior performance due to their diversified capabilities and ability to exploit economies of scale fully. Increase in the growth of SACCOs assets increase their profitability.
However, regulatory restrictions and requirements hinder the effect of ICT adoption on performance. SACCO assets provide collateral which enable them borrow funds from commercial banks to lend to its members. The result also revealed the joint effect of size and product diversification on financial performance.