Effect of Risk Management on the Performance of Projects Initiated by Deposit-Taking SACCOs in Meru County, Kenya

Abstract

Compliance challenges to the set business regulatory environment have been experienced in the management and performance of SACCOs projects. This has seen an increased desire by SACCOs to embrace corporate governance practices when they are carrying various marketing, capacity development, new product development and infrastructural projects. In Kenya, Savings and Credit Cooperatives Societies (SACCOs) are popular as forms of investment and mobilization of resources, this is because of their ability to bring about equitable development and justice. Despite these accolades, the Kenyan SACCOs have experienced mixed results as regulators have noted that they have not been meeting their members' needs and requirements as well as failing to service loans extended to them by commercial banks and other international lenders. To ensure the objectives of enhancing shareholders value have been achieved, corporate governance comes into play. Thus the main objective of this study is to determine the effect of project governance factors on performance of Deposit Taking SACCOs in Meru County. Specifically, the study focused on establishing the effect of risk management on the performance of projects instituted by deposit taking SACCOs in Meru County. The present study was premised on Agency theory, Stakeholder theory and Shareholders' theory. Structured questionnaire were administered on the target population. The 11 Deposit-Taking SACCOs regulated by SASRA formed the study target population. The study adopted a descriptive research design and made use of a census in to establish the status of project governance. The study unit of analysis was the 11 deposit taking SACCOs while the units of observation were board of directors, chief executive officers and finance and marketing managers of the SACCOs. The number of respondents involved in the census was 55. The study adopted descriptive and simple regression model. Study's results showed risk management practices had a positive and significant effect on the performance of the Deposit Taking SACCOs. The study recommends the upgrading risk management system in order to keep pace with emerging and dynamic risks being experienced in the financial sector. This study was meant to benefit financial institutions especially on the relevance of observing project governance factors.