Corporate governance practices and performance of teachers-based savings and credit cooperative organizations in central region, Kenya

Abstract

Savings and Credit Cooperative Organizations (SACCOs) have a critical role in the economic improvement of the members, more so in Kenya, where SACCOs are seen as a valuable means of microfinance. The SASRA Report (2020) shows that the SACCOs are important in the Kenyan economy because they serve more than 14 million members. Among the many existing SACCOs, teacher-based SACCOs are crucial as they have a large membership base, with the SACCOs providing critical services to the members. World over, reports indicate that teacher-based SACCOs are performing well because of a large membership base as well as loyalty. This is, however, in complete contrast to the teacher-based SACCOs in the Central region, which are small and have been characterized by instabilities and numerous challenges, including sub-optimal structures. This research aimed to establish the relationship between the corporate governance of teacher-based SACCOs in the Central Region of Kenya and their overall performance. The research study employed a mixed methodology approach, combining descriptive and explanatory research designs. The target population of the study consisted of teacher-based SACCOs in the Central region of Kenya. The research applied a stratified and systematic sampling technique to select 384 respondents from the target population. The results show that member participation as a factor of SACCO governance had a significant positive correlation. Board composition had a significant negative correlation, while Board Leadership Practices and financial regulatory factors had no significant effect on the performance of teacher-based SACCOs. The finds indicated that the participation of the members have a positive and significant impact on the SACCO performance (r = 0.612, p < 0.05), and the board composition exerted a negative and significant impact (r = -0.421, p < 0.05). The regression model as a whole is significant (F (4, 379) = 44.26, p < 0.001) and was found to explain 53.1 percent of variations in performance (R2 = 0.548, Adjusted R 2 = 0.531), although board leadership practices and financial regulatory compliance did not have any significant effect. The research recommends enhancing financial literacy among members, reviewing SASRA regulations to acknowledge the small SACCOs to lessen the financial burden, and introducing of incentive system to promote innovation and organizational efficiency.