Analysis of the Impact of Changes in Management Practices on the Growth of Credit Unions in Kenya

Abstract

Management of an organization can be a complex exercise requiring relevant resources including human and monetary. The operationalization of these resources needs proper structures anchored in well documented formats thus the necessitation of policy frameworks. Management of Co operative Unions in Kenya has experienced several modifications over the years. Currently as per the Co operative Societies Act Chapter 490 2012 section 27; the duties of the Committee (1) indicates that the Committee of a co-operative society shall be the governing authority of the society and subject to any direction from a general meeting of the society and the by-laws of the society, it shall direct the affairs of the society with powers. The Kenya Subsidiary Legislation, 2004 (2) facilitated the Co-operative Societies rules, which came into effect in Nov 2004. These Rules provided for the election of Board of directors, the supervisory committee and the appointment of managers for Co-operatives. Before 1997 the government was heavily involved in the management of Co-operatives but due to the introduction of the free-market economy Cap 490 Co operative Societies rules was replaced by the 1997 Act which minimized the governments influence and allowed for autonomy in the Co-operative movement free from the government’s involvement in its day-to-day life. This paper analyses the impact of management practices on co operative Unions growth since 1988 in Kenya. In particular it compares this growth in their financial positions, member enrolment and Co-operative Unions registration for three periods with distinct management styles using a weighted multivariate cost of return model. The cost of return financial indicator/detector is applicable to the shares and savings per period since the Credit Unions pay dividends on them as a cost while the risk measure is applicable since the loan portfolio is a risky venture. The research determines that there has been a general upward trend in the member enrolment and registration of Co-operative unions irrespective of the management style and not a major difference in their weighted trend in financial growth.