Stakeholder Management Strategies and Financial Performance of Deposit Taking SACCOs in Kenya

Abstract

This study sought to establish the relationship between stakeholder management strategies and the financial performance of deposit taking SACCOs in Kenya. The SACCO subsector is part of the Kenyan Co-operative sector comprising of both financial and non financial cooperatives. Saving and credit co-operative (SACCO) are the financial cooperatives. They are an important part of the financial sector in Kenya, providing savings, credit and insurance services to a large portion of the population. Stakeholder management is paramount in creating trust and confidence to key stakeholder especially in deposit taking SACCOs and in keeping them satisfied with the services provided. It has been argued that stakeholder management is decisive in determining whether or not a company is or will remain successful, and that it has direct environment and bottom line result of an organization. Panic in deposit taking financial institutions can cause great negative repercussions and loss of customers and hence the need for a proactive stakeholder management. Systematic attention to all parties who affect or may be affected by the organization’s behavior is critical to that organizations success. Stakeholder management studies have mostly concentrated on normative branch of stakeholder management theory. It is however important to extend the study to member - based co-operatives. The objective of this study was to look into the relationship between stakeholder management generic strategies and performance of SACCO societies in Kenya. Stratified random sampling was done to determine sample size. Data was collected from a sample of 64 Deposit taking SACCOs out of a population of 180 licensed DTS. The sample size was 130 respondents. Descriptive research method was used in this study. Questionnaires were used to collect primary data. To ensure that the research instrument yields valid data, the researcher engaged expert in the relevant field in scrutinizing it. The designed instrument was counter checked by the supervisor and peers in the area of specialization. Pilot study was carried out to check on the reliability and validity of the instrument and a Cronbach’s Alpha of 0.914 was obtained. Collected data was then edited in the field to clean it up. Data was processed using descriptive analysis and multiple regression analysis performed to determine the relationships between the stakeholder generic strategies and performance of SACCO societies. Data analysis was done using Statistical Package of Social Science (SPSS). Research findings were that: there was a significant positive relationship between offensive, defensive, swing, hold, defensive, CSR strategy and financial performance of DTSs individually. The combined model had a significant positive relationship with the performance of deposit taking SAACOs. The conclusion was that stakeholder management strategies significantly influenced financial performance of DTSs. The research contributes to stakeholder management theory by supporting previous studies that stakeholder management strategies have positive relationship with firms’ performance. The study offered practical recommendations to managers to be proactive in stakeholder management and should adopt corporate social responsibility strategy to enhance various relationships and financial performance of their SACCOs. These strategies should be incorporated in the strategic plans for achievement of good results and should not be used as disjoined activities. The study has provided instrumental contribution to stakeholder theory by finding out that, member – based firms who employ stakeholder management strategies enhance their financial performance, hence extending the body of knowledge.