DOI: 10.36347/sjebm.2020.v07i09.003

Pages: 299-303

The financial performance of Savings and Credit Cooperative Societies (SACCOs) has been improving steadily throughout the world. In Africa, SACCOs have had a significant role in transforming the continent through financial support of businesses. The SACCOs play a fundamental role in Africa’s financial sector by assisting members save money and advancing credit. Regardless of this, statistics show that financial performance of Deposit Taking Savings and Credit Cooperative Societies (DT-SACCOs) in Kenya is fluctuating as shown by non-performing loans which stood at 5.12%, 5.23% and 6.14% as at 2015, 2016 and 2017 respectively, with that of 50% of DT-SACCOS in Western Kenya being even lower. Previous studies show mixed results in linking operational risk management with financial performance. Prior studies on the effect of operational risk management on financial performance have majorly focused on banks and other micro-finance institutions indicating that the effect of operational risk management on financial performance of DT-SACCOs in Western Kenya has not been established. The purpose of the study was therefore to establish the effect of operational risk management on financial performance with a particular focus on DT-SACCOs in Western Kenya. Correlational research design was adopted and a census of the 19 DT-SACCOs for the period 2013 to 2017 was selected, yielding 95 data points. Purposive sampling was used to select interviewees. Secondary data from financial statements was used. Unit root test showed that the data was stationary at levels. Expert opinion was sought to establish face, criterion, content and construct validities. Hierarchical panel data regression was used to analyse data. The findings show that operational risk management as measured by cost income ratio has a negative significant effect on financial performance (β = -0.0499, p = 0.0001) implying that a reduction in cost income ratio by a unit will improve financial performance by 4.99%........