Effects of corporate governance on the financial performance of savings and credit cooperatives in Rwanda.

Abstract

Most studies have come up with unpredictable findings in ralation to research about Savings and Credit Cooperatives which don’t fully resolve the issue of whether a SACCO’s corporate governnance leads to improvements in SACCOs’ financial performance. Hence, this left the researcher willing to find out whether corporate governance affects the financial performance of SACCOs in Rwanda, with reference to Umurenge SACCO. The study was built on both general and specific objectives. The general objective of this study was to apprehend the effect of corporate governance in the financial performance of SACCOs in Rwanda whereas the specific objectives were; to assess the level of corporate governance practices in Umurenge SACCO, to analyze the financial performance of Umurenge SACCO in terms of liquidity, solvency and profitability and to identify the relationship between corporate governance and performance of Umurenge SACCO. In order to reach the achievement of the above objectives, a combination of questionnaires, interviews, documentary reviews and analyzing financial and other reports were used. Distribution of questionnaires was done to a group of 40 respondents who included the staffs of Umurenge SACCO, Rwamagana district. Universal sampling technique was applied in the study. Findings revealed that corporate governance practices are well supported under specific activities that are tackled both tactically and strategically which according to the findings led to better financial performance and this was represented by a mean of 4.9. Umurenge SACCOs ROA was seen raising as a result of emphasising corporate governance in the SACCO. From the chi square test analysis, the p value was found to be 0.007 which explains that there was a strong, positive monotonic correlation between corporate governance and financial performance hence, a positive impact on the financial performance of SACCOs in Rwanda. Concerning environmental scanning, this SACCO’s top management should always identify strategic factors that benefit the SACCO in towards it financial performance and this will help to combat a tendency of dependence on the top management hence effective corporate governance. As a way of having better corporate strategies in the institution, all staffs are recommended to always respect the top management’s recommendations and advice to all the staff. More so, the entire staff should always have an idea about what the top management has put in place.