Capital Structure and Performance of Savings and Credit Co-operative Societies in Tanzania

Abstract

The study examined the impact of capital structure on the performance of Savings and Credit Co-operative Societies (SACCOS). Specifically, the study examined how the sources of capital and how the allocation of SACCOS capital influences the performance of the SACCOS. Using secondary data of the SACCOS financial statements from Tanzania and, random effect regression model in the analysis, the findings reveal that higher net loan, liquid investment, members’ savings and institutional capital are both crucial determinants of performance. Also, there was no evidence on the impact of leverage on the performance of SACCOS. Moreover, the findings indicated that allocating more resources into non-financial investments lower the performance. The study recommended that giving loans should be the major business of SACCOS. SACCOS should be encouraged to focus on extending financial services to its members who will invest, rather than SACCOS investing in non-financial investments. Also, members' savings and institutional capital should remain the primary financing instruments in SACCOS.