Savings and Credit Association Model and Financial Empowerment of Members in Kericho Community Development Trust, Kenya

Abstract

Communities are expected to be financially stable with the existence of improved financial systems. Currently, there are various financial institutions, financial markets and financial instruments where communities can trade to enhance their financial empowerment. Subsequently, introduction of Accumulated Savings and Credit Association (ASCA) was perceived to serve as a mechanism for building resilience in times of emergencies or shocks for communities in Kenya; Kericho County included. Nonetheless, the ASCA component recorded the highest percentage of 45% on loans in arrears in Kericho County as reported in the Kericho Community Development Trust (KCDT) financial report of 2022. This implies that loans were largely not paid. Consequently, this investigation sought to examine the relationship between ASCA component and the financial empowerment of members in KCDT, Kenya. The study specifically sought to: examine the relationship between saving component and the financial empowerment of members in KCDT, Kenya; establish the relationship between loaning component and the financial empowerment of members in KCDT; determine the relationship between share-out component and the financial empowerment of members in KCDT; investigate the relationship between security component and the financial empowerment of members in KCDT. The study adopted null hypotheses in a thematic order. This investigation focuses on the vulnerable group theory, public goods theory and the high-cost view theory. This investigation adopted a mixed methods approach incorporating correlational research design and cross-sectional descriptive research design. This exploration targeted 380 group members from 14 active groups. Krejcie and Morgan formula was adopted in sampling 191 group members. A semi-structured questionnaire, an interview guide and a data collection matrix were used for data collection. The study adopted both descriptive statistics and inferential statistics. However, thematic analysis was used for qualitative data. The study found that the savings component had a significant positive relationship with financial empowerment (p = 0.216). In addition, the loaning component had a significant positive relationship with financial empowerment (p = 0.000). However, the high loan delinquency rates (40.1% PAR > 30 days) hindered the ability to maximize the benefits of loans. The share-out component showed a significant positive relationship with financial empowerment (p = 0.032). The security component had a significant positive relationship with financial empowerment (p = 0.000). Furthermore, inflation had a significant moderating effect on the relationship between ASCA components and financial empowerment (p = 0.000). The study recommends promoting voluntary savings alongside compulsory contributions to enhance financial discipline and empowerment. To address high loan delinquency rates, stronger loan recovery mechanisms, financial counselling and improved credit assessments are suggested. Financial literacy training should be offered to improve loan management and planning. The share-out system should be re-evaluated and modified to better align with members‘ financial goals. Additionally, while continuing to use savings as collateral for loans, the trust should diversify collateral options and ensure loans are disbursed to members with solid repayment capacity to maintain sustainability.