Moderating effect of Firm Characteristics in the Financing Diversification Performance nexus among Credit Unions in Kakamega County, Kenya

Abstract

The last two decades has seen a lot of creativity and diversity in the funding strategies pursued by credit unions as a result of financial sector liberalization and competitive pressure in the financial system. Research has shown that this diversification is both beneficial and hurting at the same time. However, firm characteristics have not mostly been factored in the diversification performance analysis though studies in other sectors underline their importance. This therefore prompted this study to analyze the moderation effect that firm characteristics specifically age, size, members occupation and management structure of credit unions could have on the relationship between diversification and performance of credit unions in Kenya. The study used a correlation analysis approach on a data set of sixteen credit unions in Kakamega County and found that whereas financing diversification had a significantly positive relationship with credit union performance; credit union size and members occupation significantly improved this relationship while age and management structure significant suppressed the relationship.