Loan Portfolio Investment and Financial Performance of Deposit Taking Savings and Credit Co-Operatives in Kenya

The largest share of assets of deposit-taking Savings and Credit Cooperative Societies in Kenya is made up of loan portfolio investment, but its financial performance contribution is empirically inconclusive as credit risk and loan default rates are on the rise. This paper has discussed how the investment in loan portfolio influences the financial performance of deposit-taking Savings and Credit Cooperative Societies in Kenya. The measure of financial performance was the return on assets and the ratio of total loans to total assets was used to measure the loan portfolio investment. The research design was a longitudinal study that utilized a panel-data collected by the Sacco Societies Regulatory Authority between 2015 and 2023, which was a census of 182 licensed Savings and Credit Cooperative Societies. A fixed effects panel regression model was used. The results showed that investment in the loan portfolio has a positive statistically significant impact on the financial performance (0.336592, 0.0000). The findings indicate that a higher investment in the assets in loan portfolios increases the profitability though the effect is comparatively small. The research paper contributes to the existing discussion on the Savings and Credit Cooperative Societies asset allocation by offering the empirical evidence on the same topic in the context of a developing economy. It suggests that Savings and Credit Cooperative Societies should enhance credit risk management models in order to reap maximum benefits on loans investments.