Corporate Governance Challenges and Their Impact on the Performance of the Savings and Credit Co-operative Organisations (Saccos) in Mombasa County, Kenya

Abstract

The Savings and Credit Co-operative Organizations (SACCOs) have for a long time been offering loans to their members at a relatively cheaper rate which made the institutions the preferred source of funds by the members and even other groups of clients. The main objective of this study was to determine what challenges the institutions faced while carrying out this noble task and how the challenges could be affecting their performance. It is in the realization of the fact that co-operatives play an important role that it was viewed that good corporate governance in the sector will also impact positively in the future growth of the sector and the economy. Likewise the challenges being faced if not well addressed would impact negatively not only on the members themselves but the economy of the many areas where the SACCO movement has taken a foot hold. The research was based on a sample of 66 SACCO societies operating in Mombasa County and it sought to identify the corporate governance practices and measures which have been put in place and the challenges being faced in implementing them and how they had an impact on their overall performance. Data was collected using a self-administered structured questionnaire and direct questions were asked for clarifications. The challenges focused on, were those experienced by the elected board members, hired societies staff and those emanating from the institutional structure and policy and regulatory framework. Performance impact assessment was gauged on the basis of financial viability as regards to safety of members’ funds and easy access and duration involved to access and pay back the loans. Board members’ general understanding and adherence to the set corporate governance procedures was also addressed. The results were analyzed, presented in form of charts, percentage distribution tables and interpreted using other statistical methods. From the results it was deduced that despite the challenges being faced, most of the institutions reported an improved level of performance in terms of membership numbers, loans and savings portfolios and efficiency. It was observed that to a great extent those societies that had put in place elaborate governance structures, laid out clear rules and policies generally performed better and experienced few challenges. However it was also noted that many SACCOs were complying with regulatory requirements laid down by the government to streamline the sector mainly to avoid being deregistered and be locked out by the governmental oversight bodies. Further research was recommended to establish the government and the sector’s relationship.