The Relationship Between Corporate Governace and Financial Perfomance of Saccos With Front Office Services Activity in Nairobi

Abstract

Saving and Credit Co-operatives are member-owned financial institutions that offer savings and credit services to their members. In response to the changes in the external environment and in an effort to provide better services to its members, SACCOS introduced the Front Office savings Entities (FOSA). This is basically a banking function of a cooperative, which emerged as a result of dissatisfaction with the services of Commercial Entities. Commercial Entities have high transaction charges, high minimum bank balances and mostly located in urban areas making them inaccessible to the majority of SACCO members. FOSA acts as channels through which members are paid their salaries. Circumventing the effect of delayed remittance, partial remittance and nonremittance of check offs from the employers. It acts as a one-stop shop for all the financial services that SACCO members need at affordable rates. This study examined the relationship between Corporate Governance and Financial Performance of SACCOS with FOSA. The study used OECD (2004) Principles of Corporate Governance and PSICG (2002) Sample code of Best Practices for Corporate Governance was used in designing the questionnaire. In Ratio computation the study used WOCCU Ratios. This study was based on Good Corporate Governance and Financial performance of all registered SACCOS with FOSA within Nairobi Kenya. Financial performance was considered as a function of the WOCCU effective financial structure ratios and liquidity ratios. The study found mixed outcome of the variables tested with a high number of variables having negative correlation and weak positive relationship. Further Research is recommended to establish other endogenous or exogenous factors which might influence corporate Governance and financial performance

The study recommends further Research which will incorporate other financial performance measure such as protection, Asset quality, Rates of Return and costs and sign of Growth.