Corporate Governance Practices and Financial Performance of Non-Deposit-Taking Saccos in Nairobi City County, Kenya

This study examined the relationship between corporate governance practices (board structure, audit committee effectiveness and internal control systems) and the financial performance of non-deposit-taking Savings and Credit Cooperative Societies (SACCOs) in Nairobi City County, Kenya, and tested whether regulatory compliance moderates these relationships. Evidence on governance and performance in Kenyan SACCOs is concentrated on deposit-taking societies, and national supervisory aggregates cannot show whether governance practices are associated with the profitability and liquidity of non-deposit-taking SACCOs in Nairobi. Evidence on whether regulatory compliance changes these relationships is also limited. Guided by Agency Theory and Stakeholder Theory, the study adopted a quantitative, cross-sectional correlational design with retrospective financial data. From 125 SASRA-authorized non-deposit-taking SACCOs headquartered in Nairobi, 56 were selected by simple random sampling. A structured questionnaire yielded 112 usable responses (two per SACCO; 80.0% response rate), consolidated to SACCO level. Five-year average return on assets (ROA) and liquidity ratio for 2021–2025 were derived from 280 SACCO-year records. Data were analysed using descriptive statistics, Pearson correlation and hierarchical regression with HC3 robust standard errors and Holmadjusted interaction tests. The study findings show that, when entered together, board structure, audit committee effectiveness and internal control systems demonstrated no statistically significant unique association with ROA (p = .364– .596) or liquidity ratio (p = .669–.980); the models explained 3.9% and 1.8% of the variance, respectively. Regulatory compliance did not significantly moderate any relationship (joint interaction tests: ROA p = .270; liquidity p = .872; all Holm-adjusted p ≥ .476). The governance composites were highly intercorrelated (r = .77–.91). The governance measures examined did not provide statistically significant explanations of differences in ROA or liquidity among the sampled SACCOs. This does not show that governance is unimportant. The study recommends that SACCO boards document and periodically review governance arrangements as accountability practice, that SASRA and the State Department for Cooperatives consider standardized governance disclosures and clear liquidity-ratio reporting conventions, and that future research use objective governance indicators and longitudinal designs. Keywords: Corporate Governance; Non-Deposit-Taking SACCOs; Financial Performance; Return on Assets; Regulatory Compliance