Effect of Intellectual Capital on Financial Sustainability of Savings and Credit Cooperative Societies in Kenya

Abstract

Today SACCOs are operating within dynamic business environment. There is an increasing importance of intellectual capital as a vital resource in a changing knowledge-based environment where this resource has turned out to be a major contributor to the existence and sustainability of firms, in addition to providing the firms with a competitive edge. The research sought to assess the intellectual capital effect on financial sustainability of Kenyan SACCOs. The theories used in this research were the stakeholder theory, legitimacy theory, resource-based theory, human capital theory and constraint induced financial innovation theory. A descriptive research design helped in establishing the findings of the study. The study target population was the management staff in the SACCOs in Kenya. Nassiuma (2000) formula helped choose the sample that was made up of 315 participants from the targeted population of 1737 participants. The selection was done with the help of stratified proportionate random sampling method. The raw data was sought from the Kenyan SACCOs management staff. In this study, the researcher used a drop and pick technique to drop the research tool top the respondents and later picked the questionnaire giving the respondents ample time to answer the questions. The received questionnaires were reviewed and given special referencing numbers and the data coded. The data was also cleaned where errors were corrected. Descriptive statistics measures such as standard deviation, average, frequencies and percentages were used on the quantitative data while the qualitative data was analysed using inferential statistics that included regression and correlation analysis. Finally, tables and graphs were used to display the findings. Relational capital was found to affect financial sustainability of Kenyan SACCOs very greatly. The study established that it was to a great extent that integrated communication systems and operations automation affect financial sustainability of Kenyan SACCOs. The research also found that it was to a great extent that employee‟s competence and qualifications impact financial sustainability of Kenyan SACCOs. The study found that customer capital influences financial sustainability of Kenyan SACCOs greatly. The study concluded that customer capital had the greatest impact on financial sustainability of SACCOs in Kenya, followed by relational capital, then human capital while structural capital had the least effect on financial sustainability of SACCOs in Kenya. The recommendation made was that there was need for managers to learn and understand their customer‟s priorities, tastes, backgrounds and needs in a bid to give them the best service that would lead to a fulfilling business relationship that would result to the SACCOs financial sustainability. Also, SACCOs should take part in corporate social responsibility activities as a way of relational capital initiative which will create goodwill and thereby spurring the firm‟s performance.