Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara  Sub-county, Tharaka Nithi County, Kenya

Peter Njagi Kirimi; Justo Simiyu; Murithi Dennis

doi:doi:10.11648/j.ijafrm.20170203.14

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Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya

Peter Njagi Kirimi, Justo Simiyu, Murithi Dennis

Published in International Journal of Accounting, Finance and Risk Management (Volume 2, Issue 3)

Received: 23 May 2017 Accepted: 29 June 2017 Published: 3 August 2017

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Abstract

Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 2, Issue 3)
DOI	10.11648/j.ijafrm.20170203.14
Page(s)	113-130
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Debt Finance, Financial Performance, Interest Rate, Loan Tenure, Interest Coverage Ratio, Debt Equity Ratio

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Peter Njagi Kirimi, Justo Simiyu, Murithi Dennis. (2017). Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. International Journal of Accounting, Finance and Risk Management, 2(3), 113-130. https://doi.org/10.11648/j.ijafrm.20170203.14

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Peter Njagi Kirimi; Justo Simiyu; Murithi Dennis. Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. Int. J. Account. Finance Risk Manag. 2017, 2(3), 113-130. doi: 10.11648/j.ijafrm.20170203.14

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Peter Njagi Kirimi, Justo Simiyu, Murithi Dennis. Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. Int J Account Finance Risk Manag. 2017;2(3):113-130. doi: 10.11648/j.ijafrm.20170203.14

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@article{10.11648/j.ijafrm.20170203.14,
  author = {Peter Njagi Kirimi and Justo Simiyu and Murithi Dennis},
  title = {Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara  Sub-county, Tharaka Nithi County, Kenya},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {2},
  number = {3},
  pages = {113-130},
  doi = {10.11648/j.ijafrm.20170203.14},
  url = {https://doi.org/10.11648/j.ijafrm.20170203.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20170203.14},
  abstract = {Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.},
 year = {2017}
}

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TY  - JOUR
T1  - Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara  Sub-county, Tharaka Nithi County, Kenya
AU  - Peter Njagi Kirimi
AU  - Justo Simiyu
AU  - Murithi Dennis
Y1  - 2017/08/03
PY  - 2017
N1  - https://doi.org/10.11648/j.ijafrm.20170203.14
DO  - 10.11648/j.ijafrm.20170203.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 113
EP  - 130
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20170203.14
AB  - Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.
VL  - 2
IS  - 3
ER  -

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Author Information

Peter Njagi Kirimi

Department of Business Administration, Chuka University, Chuka, Kenya
Justo Simiyu

Department of Business Administration, Chuka University, Chuka, Kenya
Murithi Dennis

Department of Business Administration, Chuka University, Chuka, Kenya

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Peter Njagi Kirimi, Justo Simiyu, Murithi Dennis. (2017). Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. International Journal of Accounting, Finance and Risk Management, 2(3), 113-130. https://doi.org/10.11648/j.ijafrm.20170203.14

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Peter Njagi Kirimi; Justo Simiyu; Murithi Dennis. Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. Int. J. Account. Finance Risk Manag. 2017, 2(3), 113-130. doi: 10.11648/j.ijafrm.20170203.14

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AMA Style

Peter Njagi Kirimi, Justo Simiyu, Murithi Dennis. Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya. Int J Account Finance Risk Manag. 2017;2(3):113-130. doi: 10.11648/j.ijafrm.20170203.14

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@article{10.11648/j.ijafrm.20170203.14,
  author = {Peter Njagi Kirimi and Justo Simiyu and Murithi Dennis},
  title = {Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara  Sub-county, Tharaka Nithi County, Kenya},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {2},
  number = {3},
  pages = {113-130},
  doi = {10.11648/j.ijafrm.20170203.14},
  url = {https://doi.org/10.11648/j.ijafrm.20170203.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20170203.14},
  abstract = {Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.},
 year = {2017}
}

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TY  - JOUR
T1  - Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara  Sub-county, Tharaka Nithi County, Kenya
AU  - Peter Njagi Kirimi
AU  - Justo Simiyu
AU  - Murithi Dennis
Y1  - 2017/08/03
PY  - 2017
N1  - https://doi.org/10.11648/j.ijafrm.20170203.14
DO  - 10.11648/j.ijafrm.20170203.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 113
EP  - 130
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20170203.14
AB  - Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.
VL  - 2
IS  - 3
ER  -

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