Board Diversity and Financial Performance of Deposit Taking Saccos in Siaya County, Kenya
Ong’ure, Enock Odhiambo
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Majority of the SACCOs in Siaya County are struggling a lot to execute local obligations let alone to apply board diversity due to their limited capability. Weak corporate governance according to various studies has been the root cause of failure of most financial institutions. Diversity of the board can also be at a greater risk to be influenced with other direction with personal agendas. The study generally focused on how deposit taking Sacco’s financial performance in Siaya County, Kenya was affected by board diversity. The study specifically aimed at determining how deposit taking Sacco’s financial performance in Siaya County, Kenya was affected by gender diversity, educational diversity, age diversity and board size. The theories guiding the study were; balance Scorecard Model, Agency Theory, Stakeholders’ Theory and Human Capital Theory. A descriptive design of research was employed. The unit of observation was the 57 deposit taking SACCOs within Siaya County and the unit of analysis was the 5 board members from each SACCO who make up to 285 respondents. Data was collected using questionnaires. The technique on stratified random sampling was made use of which led to the selection of 50% of the board members from each SACCO. Therefore, the sample size comprised of 143 respondents. Collection of data was done using questionnaires which were semi structured. Content validity was used through consulting the supervisor assigned by testing the tool to check whether it measures the intended purpose of the study. Test retest method was employed to ensure reliability of the questionnaires. Quantitative data was analysed using descriptive analysis and utilization of inferential analysis was done in establishing the degree to which variables related which involved analysis in multiple regression. The study concludes that having a high proportion of male board members had a positive effect on financial performance. Deposit taking Saccos with boards that have a huge diversity of skills would perform significantly better than those deposit taking Saccos that have fewer skills in their boards. Board age diversity had a significant effect on financial performance of deposit taking Saccos. The implication of this is that having a certain number of board members from diverse ages will have considerable effect on the financial performance of deposit taking Saccos and smaller board size is more correlated with the quality of monitoring and board might become less effective in monitoring management when its size increases. The study recommends that deposit taking Saccos in Siaya County, Kenya should try to incorporate more women members as it was proved to translate to more returns in terms of Sacco financial performance. The number of non-executive and independent directors needs to be selected with a lot care since they affect financial performance of deposit taking Saccos. An increase in board size for the deposit taking Saccos in Siaya County, Kenya which should be done in line with the complexity and nature of operation of the individual Sacco. Board membership should be between eight and nine persons, and any additional benefits that can be gained from the increased monitoring by additional membership will offset the costs linked with slow decision making.