Financial Performance Analysis of Kenya’s SACCO Sector Using the Altiman Z Score Model of Corporate Bankruptcy
Richard Mbuli Kivuvo, Tobias Olweny

Abstract
The cooperative sector plays a crucial role in country’s socio-economic development significantly contributing to Nation’s Gross Domestic Product. Management face the challenge to increase returns and such comes with increases in risks. Insolvency is a major risk to SACCO’s hence a source of finance instability. Kenya’s enhanced regulatory requirement has emphasized on capital adequacy requirements for SACCOs and developed financial reporting standard (CAMELS). World Council of Credit Unions has a set of financial ratios, the “PEARLS”. Z score model combine several ratio measures into a meaningful predictive model. This study analyses Sacco financial statement to determine financial performance, predictor variable potency and models contribution to finance stability. The Z scores "cut-off" values are greater than 2.99 for "non-bankrupt", below 1.81 for bankrupt and area between 1.81 and 2.99 for "grey area". The study population is 215 Deposit taking SACCOs with a sample of thirty identified randomly. Quantitative research design is used to analyze longitudinal data for the period 2008 – 2013. The study found variables X₁ and X₄ potent and other variables equally contributing to the scoring. Financial analysis shows a fairly strong finance position and need to improve performance for SACCOs in grey and bankrupt area moving them to non bankrupt position. Twenty four SACCO’s have a positive slope, a trajectory if sustained enhance sector financial stability with only six SACCOs having a negative slope. The study concludes regulatory agency is correct in advocating for additional capital base as such will improve individual Z Scores and recommends model application in finance analysis.

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