Effect of Operational Efficiency on Loan Performance: Evidence from Saving and Credit Cooperative Organisations in an Emerging Market

Abstract

The study determined the effect of operational efficiency on the loan performance of saving and credit cooperative organizations in Kenya. The study was anchored on the efficient structure theory. The study was a census of all the 180 deposits taking SACCOs in Kenya licensed by the Sacco Society Regulatory Authority-SASRA from 2016 to 2022. The study employed a causal research design using panel data and analyzed using ordinary least square regression analysis. Results established that the operation efficiency was fit to estimate loan performance in SACCOs. Operational Efficiency was negatively related to the loan performance of SACCOs. The study is expected to form the basis for policy and theory formulation, contribute to existing empirical literature in finance, and enhance loan performance and service delivery among SACCOs and other financial institutions. Therefore, the study recommends that SACCOs keep their operational efficiency toned in by reducing their total expenses to total revenue since these aspects predict the proportion of non-performing loans to total loans.