Effect of Corporate Governance on Performance of Savings and Credit Co-operative Societies in Kakamega County

Abstract

The study on the effect of corporate governance on performance of SACCOs was based on the revelations that some cooperatives are ailing, while others are very vibrant and sustainable. Good corporate governance is now accepted as vital to achieving the Millennium Development Goals and as a pre-condition for sustainable economic growth. The purpose of this study was to examine the effect of corporate governance on performance of SACCOs. Corporate governance was operationalized by transparency and accountability, shareholder involvement, policies and guidelines, and rewards and incentives while performance of SACCOs was characterized by growth in share capital/deposits, growth in membership, growth in turnover, and customer satisfaction. The significance of the study was to demonstrate the need for good corporate governance in the co-operative movement. Extensive literature was reviewed to establish the importance of the study, highlighted knowledge gaps and provided benchmark for comparison of the findings. The target population was 33 Savings and Credit Co-operative Societies in Kakamega County. Stratified sampling was applied to get the number of respondents in the study. The respondents were the executive board members, ordinary members, and Chief Executive Officers from the sampled SACCOs. Descriptive and correlational survey designs were both used. Data collection was conducted by use of a questionnaire and document review. Cronbach’s alpha coefficient (KR 20), a test of reliability was computed to define the correlation of items contained in the instruments. Piloting of the instruments was through pre-testing of the instruments by carrying out a pilot study in two co-operatives that is Weko and Wesacco. Data was analyzed using descriptive and inferential statistics. The study found that corporate governance had a significant positive effect on performance of SACCOs. Recommendations from this study included the need for all SACCOs to embrace corporate governance since it enhances performance. Measures should also be put in place for SACCOs to embrace right culture, learning, and right organizational structures as they implement their plans. However, the study has recommended further researches on the effect of corporate governance in other types of co-operatives like housing, marketing, and co-operative unions and research that will cover a wider area.

Key words: Corporate Governance, Performance, Savings and Credit Co-operatives, Kenya