The Effects of Risk Management and Funds Allocation Strategy towards Financial Performance of Deposit Taking Saccos in South Rift Region (Kenya)

Deposit Taking Savings and Credit Cooperatives Societies (SACCOS) are the societies which have been licensed to take deposits from their members. This business activity was introduced by Sacco Societies Act (2008). The Act also establishes the Sacco Societies Regulatory Authority (SASRA). All deposit taking saccos are licensed, monitored and supervised by SASRA. In running savings and credit business, it involves risk taking. Managing risk should be prioritized so that saccos can achieve optimum financial gains. Risk management involves good strategies like loan policy, contingency plan and debt analysis to minimizing risks. Prudent funds allocation strategy also reduces exposure of risk. Risk management and funds allocation strategy influence financial performance significantly. Financial performance is measured by six parameters. They comprise protection, effective financial structure, assets quality, rate of return, liquidity and signs of growth. The purpose of this paper is established the effect of risk management and funds allocation strategy towards financial performance. Data was collected from 14 deposit taking saccos in south rift region. The questionnaires were filled by sectional heads and board of directors. The respondents were 91 in total. The findings from the study indicates that risk management and funds allocation strategy explains 95.8 % variation of financial performance of deposit taking saccos in south rift region ( Kenya). The study recommends that debt analysis policy should be strengthened so that risk is minimized.