Extent of adoption of corporate governance principles by Deposit- Taking SACCOs in Kenya and the effect on financial performance
Yegon, Linda Chelangat
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This research sought to determine extent of adoption of corporate governance principles by deposit-taking Savings and Credit Cooperative Societies in Kenya, and the effect on financial performance. Reference was made to the corporate governance principles of accountability, disclosure and transparency, and risk management as envisaged by the Organisation for Economic Co-operation and Development (OECD), and their incorporation into the legal and regulatory framework governing deposit-taking SACCOs in Kenya. The general objective of the study was to establish the correlation between extent of adoption of corporate governance principles and the financial performance of deposit-taking SACCOs in Kenya, and to identify weaknesses in the legal and regulatory framework, as well as to examine the impact of corporate culture of DT-SACCOs on their financial performance. The thesis considered the background of corporate governance and its development to combat governance shortcomings that saw financial institutions with systemic significance collapse, causing disruption globally. Considering the rise of deposit- taking SACCOs in Kenya, and their significance in the Kenyan financial eco-system, the research examined the incorporation of corporate governance principles in the legal and regulatory framework governing SACCOs as well as in the internal systems of the SACCOs, and the resultant effect it has had in the financial performance of deposit-taking SACCOs in Kenya. Desk-based research methodology was adopted, relying on primary data and secondary sources. The research also considered the stewardship and stakeholder theories of corporate governance. This research found that there indeed is a correlation between the financial performance of DT-SACCOs in Kenya and the extent to which they have adopted the corporate governance principles of accountability, disclosure and transparency, and risk management. The recommendation of the research was to strengthen the legal and regulatory framework governing DT-SACCOs in Kenya, specifically regarding corporate governance principles. It was also recommended by this research that boards of directors of DT-SACCOs strengthen the corporate culture of their organizations so as to enhance compliance to corporate governance requirements in order to achieve sustained financial performance.