Corporate Governance Practices and Competitive Advantage of Selected Deposit-Taking Savings and Credit Co-Operatives Societies in Nairobi City County, Kenya

Abstract

Deposit-taking Savings and Credit Co-operative Societies (SACCOs) play a crucial role in Kenya's financial sector, yet many face persistent challenges related to governance inefficiencies, declining profitability, and escalating competitive pressures. Despite the acknowledged importance of governance frameworks in financial institutions, SACCOs in Kenya continue to face persistent governance-related challenges that compromise their competitiveness and long-term sustainability. This study addresses the underexplored strategic role of corporate governance practices in fostering competitive advantage within selected deposit-taking SACCOs in Nairobi City County, Kenya. The research specifically investigated the relationship between corporate governance practices and competitive advantage, focusing on key dimensions such as board independence, board diversity, equitable treatment of shareholders, and disclosure and transparency. It also examined the mediating influence of organizational culture on this relationship. The study was guided by agency theory, stakeholder theory, and the theory of competitive advantage. A convergent parallel mixed-methods approach was adopted, utilizing both quantitative and qualitative data to ensure comprehensive analysis. The study targeted 129 SACCO members, from which a purposive sample of 120 respondents were identified along with 9 board members. Data were collected through structured questionnaires and semi-structured interviews. The findings were summarized using descriptive and inferential statistics, including regression analysis, and presented through tables and narrative explanations. The study revealed that sound corporate governance practices such as transparency, accountability, risk management, and board independence played a critical role in enhancing competitive advantage. A majority of interview respondents affirmed that these practices were integrated into SACCO operations. Regression analysis indicated a strong positive correlation between corporate governance practices and competitive performance, with corporate governance practices explaining over half of the variance in competitive advantage. Furthermore, a majority of respondents attributed improved decision-making to board independence, while another significant proportion identified transparency as the primary driver of member trust and loyalty. The findings demonstrated that effective corporate governance practices led to increased member satisfaction and enhanced service delivery, supporting SACCOs' efforts to sustain market leadership. The study recommended aligning governance frameworks with organizational culture to maximize effectiveness. It also advocated for regular training for board members and management to ensure adherence to best practices, industry standards, and regulatory requirements. For future research, the study suggested conducting longitudinal analyses to examine the long-term impact of corporate governance practices on SACCO performance. It also recommended exploring the role of technology in enhancing corporate governance practices, particularly in promoting transparency and operational efficiency. Lastly, comparative studies across various SACCOs were proposed to identify best corporate governance practices and differences in competitive advantage across diverse organizational contexts