| dc.description.abstract | Corporate governance as practiced by SACCOS did not factor in the management of
Front Office Savings Accounts (FOSAs), which, within a span of 15 years have
tremendously grown in numbers, products and member deposits held. FOSAs are now
a common feature in both urban and rural SACCOs competing directly with commercial
bank accounts and financial institutions. Not much research has been made on the
corporate governance of FOSAs except general guidelines associated with SACCOS as
in Oyoo (2002) and Ongore (2001).
FOSAs have been associated with a history of poor governance by their boards and
management committees. The cooperative principles and values have been lost as the
trustees put their priorities before that of members Wangombe (2003). There is no clear
distinction between the roles of directors and management, which often results into
conflict of interest. Majority of the board members and management teams have also
been found to be lacking financial management skills necessary for running the complex
FOSA services, which are essentially banking in nature. This has been blamed on the
democratic nature for electing office bearers. As in their mother SACCOs, most FOSAs
have also not incorporated codes of best practice as a guiding principle of governance
and where they exist, they are rarely used.
Based on the above, the study was conducted with the objective to establish and
explain the governance systems within SACCO Front Office Savings Accounts. A
questionnaire was administered to 50 FOSAs, of which 37 were fully completed.
The study found out that FOSA objectives reflects the objectives of their members and
that FOSA member relation being Good. The Board relationships with the monitoring
agencies were also found to be very good. It also found out that FOSAs have strategic
plans of sufficient quality and content, which are reviewed against business plans. The
Board of the management of FOSA's were also found to be monitoring their activities on
a regular basis.
The study found out that the FOSA's legal and ethical requirements are met
satisfactorily and only 46% had signed code of ethics. It was also noted that the FOSAs,
which experienced frauds, were the same that neither had a signed code of ethics nor
an audit committee. While majority knew who recruited the FOSA managers, there were
some who did not know how the FOSA Manager was recruited.
The study also found out that the respondents knew the problems afflicting FOSA such
as inadequate knowledge on FOSA operations, lack of office facilities, minimal IT skills,
lack of long term lending, defection by members, competition from other financial
institutions etc. Their solutions were also proposed as follows, training in all necessary
areas, proper market intelligence, networking of FOSA and Back Office etc.
The study recommended proper legislation, greater involvement of the board in the
management of the FOSAs, entrenchment of code of ethics to minimize frauds. Indeed
it should be a requirement of that all FOSA must sign a code of ethics.
The study also recommended a further research to establish ethical and moral conducts
of FOSAs, and also a further research to gauge how FOSA individual members and
customers view the operations of FOSAs in general. | en |
