Public Policy and Administration Research www.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online) Vol.3, No.6, 2013 65 Impact of the Sacco Societies Regulatory Authority (SASRA) Legislation on Corporate Governance in Co-operatives in Kenya Kenneth M. Muriuki* and Mary Ragui Jomo Kenyatta University of Agriculture and Technology (JKUAT), Nairobi CBD Centre, Box 62000 00200, Nairobi, Kenya. * E-mail of corresponding author: kenmuriuki2010@gmail.com Abstract Following challenges such as mismanagement, conflicting mandates among regulatory bodies and poor corporate governance, the Savings and Credit Co-operative Societies (SACCO) Societies Act No. 14 of 2008 was put in place to address some of these challenges. This paper is anchored on a study on the impact of this legislation on financial management of SACCOs. It will only highlight the impact of the legislation on the corporate governance. The study adopted descriptive research design. Data was collected through questionnaires and secondary sources. Statistical Package for Social Sciences (SPSS) was used to generate the outputs for both descriptive and inferential statistics. From the findings, the legislations have influenced corporate governance to a great extent though there is still room for improvement. The study recommends synchronization of key monitoring tools with the SACCO’s systems and processes achievable via exploitation of information and communication technologies. In addition, it recommends building the right infrastructure and allocating the right resources and human capital. Key words: SACCOs, Co-operatives, performance, shareholders, board, integrity. 1. Introduction The Co-operatives anchored on a well established Co-operative philosophy based on seven principles formulated by the International Co-operative Alliance which include: voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, cooperation among co-operatives and finally concerned for the community (Hans and Hunker, 1976). Prudent corporate governance is a requirement for effective and efficient performance of any organization and, therefore, Savings and Credit Co-operative Societies (SACCOs) are no exception. Performance of the SACCOs is usually associated with their financial performances which are usually highlighted by dividend declarations and payments. The management committees in these SACCOs are also responsible with the utilization of the member’s funds and the majority of them have inadequate financial records leading to many fraudulent transactions (Branch, 1992). 2. SACCOs in Kenya The Co-operative movement in Kenya was started by the European farmers in 1908 when they started the first Co-operative called Lumbwa Farmers Co-operative Society for the purpose of marketing their cereals, fruits and dairy products (Kobia, 2011). It was not until the mid 1940’s that the colonialists agreed to introduce Co- operatives in the colonies as a piece meal programme for the development of Africa. In 1945, Kenya enacted the Co-operative Ordinance which was followed by the creation of a department under the Registrar of Co- operatives in 1946, whose objectives were to farm and to promote farm products (Kibanga, 2001). Today there are many types of Co-operatives in nearly all the sectors of the Kenyan economy. Some are haphazardly formed without the necessary considerations in mind and as such many don't go very far before disintegrating or being liquidated because of poor management, lack of records and financial systems, misappropriation of funds among others (Kobia, 2011). The performance of the SACCOs made the Government to take specific measures to improve their effectiveness and efficiency. This was done through, the Co-operative Societies Act of 1966 Cap 490, the Co-operative Rules of 1969 which gave the Commissioner for cooperative development wider powers to prevent misappropriation and misuse of funds and also empowered overall efficiency of the co-operative movement. In addition, the second National Development Plan of 1970 – 1974 and more specifically the Co-operative development policy for Kenya under the session paper no. 8 of (1970) and the introduction in 1998 of the Co-operative Act no. 6 of 1997 to govern the operations of the Co-operatives under a liberalized economy (Kibanga, 2001).