Corporate Governance and Financial Performance of Savings and Credit Cooperative Organizations in Western Kenya

Abstract

Corporate governance is very essential in every organization in order to enhance service delivery as well as performance. However, despite the financial institutions such as Savings and Credit Cooperative Organizations having the necessary resources, they are experiencing the problem of poor corporate governance more particularly with the management which in some cases, which has contributed to poor financial performance leading to a decline of profits, customer dissatisfaction and poor image. This work sought to evaluate on the association between organizational governance and financial performance of Savings and Credit Cooperative Organizations in Western Kenya. The study used descriptive study design. All 93 SACCOs in western Kenya were sampled and selected by purposive sampling design. Primary data was collected using questionnaire and analyzed by SPSS. Results indicate that Board Composition (p=0.007<0.05), Internal Control Systems (p=0.000<0.05), Board Size (p=0.022<0.05) and Board Transparency (p=0.000<0.05) significantly affect financial performance of SACCOs in western Kenya. The study concludes that all the constructs of organizational governance like, board transparency, board size, board composition and internal controls are significantly linked with performance. The study recommends effective board composition, correct board size, board transparency and implementation of internal controls in order to significantly improve financial performance.