Financial Innovation and Financial Performance of Deposit-Taking SACCOs in North Rift Region, Kenya

Deposit-taking SACCOs in the North Rift Region of Kenya face significant financial performance issues that impede their ability to effectively serve their communities and sustain long-term growth. Therefore the study sought to assess the effect of financial innovation on financial performance of deposit-taking Saccos in North Rift Region, Kenya. Specifically, the study sought to assess the effect of product innovation, process innovation and organizational innovation on the financial performance of DT-SACCOS in the North Rift region. The study was anchored on the Schumpeter’s theory of innovation, transaction cost innovation theory, innovation diffusion theory and dynamic capabilities theory. The study employed a causal research. The unit of analysis was 30 deposits taking SACCOs licensed by SASRA in the North Rift Region. The unit of observation was 408 employees working with the with these SACCOs. The study used Slovin formula to obtain a sample size of 202 respondents. Secondary and primary sources of data were used to meet the objectives. The study assessed content validity, face validity and construct validity. Secondary data was collected through data google sheet to collect data on net income and average total assets for all the Saccos. Descriptive statistics was employed in this study to determine general trends of the related variables. The study used multiple linear regression to determine the extent to which independent variable predicted the dependent variable. The findings revealed that product innovation had a strong positive correlation with ROA. In addition, the findings revealed that process innovation showed an even stronger positive correlation with ROA. Finally, the findings revealed that organizational innovation was positively correlated with ROA. Based on the findings the study concludes that product innovation had a significant effect on the on financial performance of deposit-taking Saccos in North Rift Region, Kenya. In light of the findings the study recommends that the Deposit-Taking SACCOs (DT-SACCOS) should embrace a culture of innovation by encouraging creativity, experimentation, and continuous improvement within the organization. In addition, regulators and policy makers should develop supportive regulatory frameworks and policies that encourage innovation, competition, and entrepreneurship within the SACCO sector. Keywords: Financial Innovation, Product Innovation, Process Innovation, Organizational Innovation, Financial Performance.