International Journal of Science and Research (IJSR) ISSN (Online): 2319-7064 Index Copernicus Value (2013): 6.14 | Impact Factor (2015): 6.391 Volume 5 Issue 4, April 2016 www.ijsr.net Licensed Under Creative Commons Attribution CC BY Influence of Investment Decisions on the Financial Performance of SACCOS: A Survey of Registered SACCOS in Baringo County Rotich David Kipkorir 1 , Barbara M. Namiinda 2 , Doreen Njeje 3 Kenya Methodist University, Department of Business Administration, P. O. Box 3654-20100 Nakuru 2 Kenya Methodist University, Nakuru Campus, P. O. Box 3654-20100 Nakuru 3 Kenya Methodist University, Nakuru Campus, P. O. Box 3654-20100 Nakuru Abstract: The purpose of this study was to assess the influence of investment decisions on the financial performance of registered SACCOs in Baringo County. The objectives of the study were to determine the influence of investment in real estate, FOSA activities, lending to members and lending to government on the financial performance of registered SACCOs. The study was guided by the stakeholder theory, information theory and decision making theory. The study was based on a descriptive survey design and targeted 316 members in 73 registered SACCOs in Baringo County. Stratified sampling was used in selecting a sample size of 177 respondents. Data was collected using questionnaires and analyzed using both descriptive (means and standard deviation) and inferential statistics (regression analysis). The study concludes that investment in real estate influenced 9.8% of the financial performance of SACCOs in Baringo County while 15.3% of registered SACCOs’ financial performance was explained by lending to members. The study also concludes that FOSA activities influenced 16.6% of registered SACCOs’ financial performance in Baringo County while10.7% of SACCOs’ financial performance was explained by lending to the government. The highest influence was explained by FOSA activit ies, followed by lending to members, then lending to the government and finally investment in real estate. Keywords: Influence, Financial Performance, Investment Decisions, Registered SACCOs, , investment in real estate, FOSA activities, lending to SACCO members, government bills and bonds 1. Introduction Investment is defined as the process of mobilizing of resources to undertake a given activity with expectation of future returns (Donald, 2010). Literally the word investment means the action of putting something somewhere else in order to get a return. It involves the purchase of an asset or equivalently a deposit to a bank with the hope of getting a future return or interest from it (Prasanna, 2008). Investment decision making is an important part of the strategic decision-making in every enterprise because investment projects essentially affect future economic results and dramatically contributes to the growth of an enterprise. The quality of investment decision is affected by a large number of factors, while the most important is the selection of investment projects (Hana, 2010). According to Mantrala and Naik (2007) when deciding on an investment option, managers need to know whether they are in the uphill side or on the downhill side of the profit function with respect to each investment variable. The lack of knowledge about the firm’s location, leads managers to make serious errors in their investment decision (Thorson, 2007). Seibel and Parhusip (1998) have observed that internal resource mobilization and sound utilization of funds are the grounds for sustainable investment decision. Hagerman and Kenkel (2000) in their research on evaluating investment opportunities in Canada reccommended that in looking at investment opportunities, firms should use payback period, internal rate of return, net present value, profitability index, discounted payback, risk involved, potential to increase customer base, market share and the potential of the service to increase service to members. According to Dlamini (2011) SACCOs are associations of people who pool together their financial and human resources for the purpose of providing loans for each member and using the pool of ideas for the betterment of the lives of the members. SACCOs are formed to mobilize savings from which they can make loans at reasonable rates of interest (Phikwe, 2004). All over the world SACCOs remain the most important players in the provision of financial services than any other type of financial institution (Thiagarajan, 2011). They provide savings, credit and insurance services to a large portion of the population. In Kenya, the cooperative movement dates back to 1931 when the first ordinance to regularize the operations of the cooperatives was enacted. Currently SACCOs are registered and regulated under the Co-operative Societies Act. However, SACCOs are restricted in terms of where to invest their funds or deposits (Sacco Act, 2008). The importance of SACCOs’ stability is noteworthy as any distress may affect the development plans thereby lowering the economic progress (Thiagarajan, 2011). The stability of SACCOs is therefore a pre-requisite for economic development and resilience against financial crisis (Chambo, Mwangi & Oloo, 2013). Like any other business, success of SACCOs is assessed based on profit and quality of asset it possesses. Even though SACCOs serve social objectives through its priority sector lending and membership, maintaining asset quality and profitability is critical for SACCOs’ survival and growth. In comparison with other East African economies, Kenya’s financial sector has for many years been credited for its size and diversification (Kithinji, 2010: Gaitho, 2013). SACCOs are able to advance Paper ID: NOV162685 904