Corporate governance, credit risk management and financial performance of SACCOS in Teso Sub-Region.

Abstract

The purpose of this study was to investigate the relationship between corporate governance, credit risk management and financial performance of SACCOs in Teso sub-region. The study was guided by the following research objectives; to establish the relationship between corporate governance and credit risk management, examine the relationship between credit risk management and financial performance, as well as examine the relationship between corporate governance and financial performance of SACCOs in Teso sub region. A sample of 87 SACCOs was selected from a population of 104 SACCOs in the eight districts of Teso sub-region that had been operational for at least three years and registered with the Registrar of Cooperatives by 2010 and a questionnaire was distributed to each of the SACCOs, collected and thereafter the data was analyzed using SPSS package and descriptive, correlation, and regression analysis were carried out.

Findings revealed that some SACCO managers are sheltered by the founder syndrome and there was a significant positive relationship between all the study variables corporate governance, credit risk management, and financial performance. Results from the regression analysis showed that corporate governance and credit risk management significantly predicted 34.1% of financial performance of SACCOs in Teso sub-region.

The study concluded that some SACCO managers are covered by the founder syndrome which may explain the relatively poor financial performance of these SACCOs. SACCOs were therefore advised to create awareness amongst the members as well as encourage SACCOs to implement and adhere to corporate governance principles and training of staff in related areas of credit risk management.