The Role of Management Practices in Enhancing Financial Performance of Selected Deposit Taking Saccos in Kericho and Bomet Counties, Kenya

Abstract

Persistent challenges, such as the decline in market share, clientele, and profitability, have plagued Kenya’s deposit-taking savings and credit cooperatives (DT SACCOs). As the market becomes more competitive with the entry of new participants, several DT SACCOs, particularly in Bomet and Kericho Counties, have experienced failures due to industry changes. Some have faced operational restrictions, while others have lost their licenses. The study focuses on the management practices and financial performance of selected DT SACCOs in Kericho and Bomet Counties, aiming to determine how corporate governance, SACCO regulations, stakeholder involvement, and core competencies influence their performance. Using a descriptive research design, it targeted employees of selected DT SACCOs in Kenya, with a population of 87 employees from Kericho and Bomet Counties. A census sampling approach was adopted, covering all 87 employees. Data was analyzed using descriptive and regression analysis. The findings revealed a strong consensus among employees on the critical role of corporate governance elements—such as board composition, management accountability, and effective communication—in improving SACCOs’ financial performance. Low standard deviations across survey statements indicated high agreement on the importance of these practices. The regression model revealed a strong explanatory power, with an R² value of 0.8082, indicating that 80.82% of the variability in financial performance was accounted for by the studied predictors (corporate governance, regulations, stakeholder involvement, and core competencies). The adjusted R² (0.786) confirmed the model’s robustness, retaining 78.6% explanatory power after adjusting for predictor variables. This underscores the dominant role of these factors in shaping SACCO performance, while the remaining 19.18% unexplained variance highlights the need for future research to explore additional influences. The study provided stakeholders with actionable insights to address strategic challenges faced by DT SACCOs. The study recommends well-defined roles for board members, enhanced management accountability, and regular evaluations of governance practices. Training programs on governance best practices can equip leadership with skills to align decisions with strategic goals. These measures are vital for mitigating operational inefficiencies, boosting financial performance, and ensuring the sustainability of DT SACCOs in Kenya’s competitive landscape.