Governance Practices in Financial Services Associations in Kenya

The purpose of this study was to investigate governance practices in Financial Services Associations (FSAs), more specifically, the roles of the outreach model, Board of Directors, Shareholders and Financial Reporting in the governance of FSAs in the Rift Valley Province of Kenya. The descriptive research design was employed. Stratified and simple random sampling techniques were used in selecting a sample of 121 shareholders, 7 managers and 22 directors. A questionnaire and focus group discussions were the main data collection instruments. Both quantitative and qualitative data analysis methods were used. The findings show that the outreach model is participative in nature and this effectively promotes good governance in FSAs. In addition, the shareholders too are effective in promoting good governance practices, while, the board of directors as a governance practice is ineffective due to the directors’ conflict of interest. Given the low level of reporting, financial reporting too, was not one of those practices that promote good governance in FSAs. Based on the study findings, a few conclusions and recommendations were made. The failure by the shareholders to recognize that they own their respective FSAs leads to their passive participation in the management of FSAs which in turn makes them unable to control the Boards of Directors. Due to their active involvement in loans recovery, the shareholders are actively engaged in governance activities. They should therefore be trained and educated on their rights and roles so that they can be more active in the governance of FSAs. Because the Board of Directors are not actively engaged in the governance of FSAs, independent non executive directors with the necessary technical competence should be incorporated in the board. This move, it is assumed will boost the board’s oversight role and in turn, good governance. In conclusion, this study recommended further research so as to test the relationship between governance and the overall performance of FSAs. In addition, there is need to study the role of the legal and regulatory structures in FSAs