Corporate Governance and Financial Performance of Licensed Deposit-Taking Saccos in Kiambu County, Kenya

Abstract

Deposit taking saving and credit societies play a basic role in the provision of financial services to the Kenya household and small business segment. Deposit Taking SACCOs are those that provide products similar to banks most of which were set up long time. However, their performance is defective and tremendously varies as compared to commercial banks. Further, there are less previous studies focusing on the effect of corporate governance on financial performance of Deposit-Taking SACCOs in Kiambu County. The purpose of this study was to investigate corporate governance and financial performance of licensed Deposit-Taking SACCOs in Kiambu County, Kenya, for the years 2015 to 2019. The study sought to address the following research objectives; to determine the status of corporate financial reporting on financial performance of licensed deposit-taking SACCOs; to determine the status of transparency, disclosure requirements and accountability on the financial performance of licensed deposit-taking; and to establish the extent to which internal controls affect the performance of licensed deposit-taking SACCOs in Kiambu County, Kenya. The research adopted descriptive research design to examine the relationship between corporate governance and the financial performance of licensed Deposit-taking SACCOs in Kiambu County, Kenya. The researcher decided to select Kiambu County for research because it has the largest distribution of Deposit-taking SACCOs in the country ranking second from Nairobi, thereby providing a reliable picture. Multiple regression models were used to establish the relationship between independent variables and dependent variables. The researcher adopted the census method of data collection because the SACCOs licensed by SASRA are few in number i.e. fourteen (14). The target population was the fourteen (14) licensed Deposit-taking SACCOs operating in Kiambu County, as at December 2019. Questionnaire was administered to the executive officers, senior managers, employees and members of the SACCO to collect primary data. The questionnaire was a Likert scale format. Secondary data was collected from the fourteen (14) audited financial statements at SASRA offices for the years 2015 to 2019. Primary data was analyzed using descriptive techniques i.e. mean, standard deviation and frequencies. The analysis was based on excellence set by the World Council of Credit Unions (WOCCU). ANOVA was used to test whether Deposit-taking SACCOs have proper corporate governance structures. From the study findings, Pearson correlation between the variables showed a positive relationship between independent variables (corporate financial reporting, transparency and disclosure, internal control system) and dependent variable (financial performance of deposit-taking SACCOs). Moreover, coefficient of adjusted determination was 0.789 which translates to 78.9%. This shows that variations in dependents variable was explained by the independent variables. The study concluded that corporate governance practices influenced the financial performance of the deposit-taking SACCOs in Kiambu County. The study recommends that SACCOs should adhere to transparency and disclosure requirements set by Sacco Societies Regulatory Authority (SASRA). The financial reports should be available and updated throughout and internal control system should be improved and implemented diligently towards keeping the accounting records and financial reports accurately.