Board characteristics and financial performance of savings and credit cooperative societies in Muranga County, Kenya.
Wakaba, Grace Wairimu
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A board of management carries a very crucial role in the management of SACCO’s hence it is very important to understand how their characteristics and effectiveness influence the organization’s financial performance. Any enterprise that has to thrive financially requires a good board of management system in place. It is through the self-help initiatives that people come together through Savings and Credit Cooperative Societies to solve their social-economic challenges, support one another and drive business ventures which are meant to equally benefit the members. The study purposed to investigate the influence of board characteristics and financial performance of Local Savings and Credit Cooperative Societies in Murang’a County, Kenya. The study was framed on the specific objectives which were; to determine the influence of board size, board composition, board experience and board level of education on financial performance of Local Savings and Credit Cooperative Societies in Murang’a County, Kenya. The research proposal was based on stakeholder theory, agency theory, stewardship theory and resource dependency theory in order to link the independent variables with the dependent variable. The research adopted descriptive survey design. The study targeted all the 24 licensed Savings and Credit Cooperative Societies operating in Murang’a County. The study relied on both primary and secondary data. Research questionnaires were used to collect primary data and a checklist to collect secondary data. The research instrument was subjected to review and pre-testing prior to conducting the actual study so as to enable it gain the recommended validity and reliability. The collected data will later be analyzed by use of descriptive statistics such as means and standard deviations and also inferential analysis such as Pearson Correlation coefficient and regression coefficient. Prior to running the regression coefficients, the study conducted a diagnostic test of the data using normality and autocorrelation tests so as to ensure the data did not have anomalies or biased in nature. Frequency tables, figures were helpful in data presentation. The study established that board size had a positive insignificant effect on financial performance while board composition, board experience and board level of education had a positive significant effect on financial performance. The study recommends that the Savings and Credit Cooperative Societies need to ensure that they have the optimal number of board members as it may help in improving the problem solving within the cooperatives and increase its efficiency in carrying out its operations, the boards should be well composed with members of different kills and all genders should be well represented, board of directors and especially the managers should be well experienced in financial and cooperative management and have also necessary skills that the cooperative may benefit from and lastly board members are well educated and trained. However, the Savings and Credit Cooperative Societies should not struggle to higher very highly trained managers since highly educated managers may not necessarily guarantee transparency and accountability in the SACCO and hence its effect on financial performance is short lived and in the long run this merit may not hold