International Journal of Economics, Commerce and Management

United Kingdom Vol. V, Issue 2, February 2017

http://ijecm.co.uk/ ISSN 2348 0386

ESTABLISHING THE EFFECT OF CORPORATE GOVERNANCE

STRATEGY TO CREATE SUSTAINABLE, ECONOMICALLY
VIABLE ENTERPRISES THROUGH WOMEN SELF-HELP GROUPS

Phelista Wangui Njeru

School of Business and economics, Mount Kenya University, Thika, Kenya
[email protected]

Abstract
Self Help Groups (SHGs) are voluntary initiatives by group of individuals often in similar social
circles who come together to solve their common social and economic needs. SHGs have
gained great interest to the society and governments. The groups contributions have improved
economic status of the members and reduced poverty levels in both urban and rural areas in
Kenya. Observations show that these groups have the potential to do even better economically
if they stop being run in unorthodox manner usually by individuals with little or no training. The
members contributions are put in terminal projects and there is no access to formalised credit
facilities. There is need to explore a new dimension in the management of these SHG as a way
of shifting from the tradition way of merry- go round to tap the full potential of these groups. The
study was therefore aimed at establishing the effects of corporate governance strategy in
creating sustainable economic development of self-help groups. The study was done on 10
women groups with a membership base of 244 women in Kiambu County. This formed the
target population. At random 30%of the population was picked as a sample size i.e. 73
respondents. The study proposed a corporate governance strategy that could be achieved
through transformational leadership, training, as a means of totally exploiting the groups
potential and a vehicle to drive the groups to be economic epitome for a sustainable economic
development. Inferential statistics revealed that there is a strong relationship between corporate
governance and good performance of SHGs.

Keywords: Empowerment, Training, Sustainable Economic Development, corporate

governance, leadership

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INTRODUCTION
Self-help groups (SHGs) have become a common phenomenon in Africa and in most parts of
the world. These groups control millions of shillings albeit in an adhoc manner and in traditional
way. This research was to establish the relationship between corporate governance and
performance of SHGS. The research was catalysed by the observed low performance of these
groups despite so much funding and support from varied agencies both financially and
otherwise.

Background information
Self Help Groups are either formally registered or unregistered micro finance enterprises
composed of members sharing common social and economic interests. The members are
drawn together to solve shared social and economic problems in their environment. On
voluntary basis, members join the groups to create a common fund to meet their emerging
needs on mutual help basis, alleviate poverty among them and create wealth. Most groups are
initiated by a few individuals in the community while others are generally facilitated by
nongovernmental organisations. The Self Help Groups (SHGs) Guiding Principle stresses on
organizing the rural poor into small groups through a process of social mobilization, training and
providing bank credit and government subsidy which at times may not be forthcoming. Members
make small regular savings contributions to meet their targets and goals. They may obtain
credits from NGOs or the government initiated programmes like women and youth funds (uwezo
fund) in Kenya which assist in achieving their targets in less time. From the entrepreneurship
outlook, self help groups are comprised of micro entrepreneurs having homogeneous social and
economic background, mutually agreeing to contribute to a common fund for a common goal.
They pool their resources to become financially stable, taking loans from the money collected by
that group and by making everybody in that group self-employed. The group members use
collective reasoning and peer pressure to ensure proper end-use of credit and timely
repayment. This system eliminates the need for collateral as required by the mainstream
finance providers and is closely related to that of solidarity lending widely used by micro finance
institutions. The groups set a flat rate of interest on loans borrowed to ease their accounting
recording requirements. This is important since majority lack the right personnel or capacity to
maintain complex books of accounts.
Irrespective of their initial reason or formation, their economic, social and political
contribution cannot be underrated in todays dynamic environment both in the urban and rural
areas. Self-help groups generally have broad anti-poverty agendas. These groups are seen as
instruments for a variety of goals including empowering women, developing leadership abilities

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among poor people, increasing school enrolments, and improving nutrition and the use of birth
control.
The dynamic and increased entrepreneurial activities by the SHGS today contribute
greatly towards economic growth and development. Like any other enterprise, SHGS for
instance have engaged in projects management as entrepreneurial activities hence creating
employment, improve the living standards of people, generate income for the government, and
increase the national income apart from stabilizing a country politically. Probably one of the
most comprehensive accounts of the contributions of SHGS IS written by Mary NjeriKinyanjui
(University of Nairobi) in her book (2010), called Vyama: institutions of hope The book looks at
the role of vyama in learning and education, investment, redistribution, social protection and
socio-economic development. In Kenya over 80% of women between the age of 25 and above
are in one SHG or another operating under the famous traditional name chama meaning
pooling together.
Its observed that those SHGs that shift from the traditional Chama operations and small
time merry go round activities and adopt the corporate outlook. They are able to perform
tremendously well economically socially and politically. There is therefore the need to re- look in
to the governance strategies employed vis a vis the desired corporate governance strategy as a
way of tapping the full potential of the majority of SHGS operating below potential. To achieve
the desired corporate governance, the leadership in these chamas needs proper empowerment
through training. According to Justin Y., C. Monga (2011), Chamas dynamics promote growth in
the entire economy.
This study therefore looked at proper corporate governance of enterprises formed on a
community platform through self-help groups. This is because the self-help groupings have
become very popular among all the communities in Kenya living in both rural and urban
Centres. They have provided avenues of pooling resources together to reduce individual
poverty level generate more income and solve common social and economic problems among
community members. Their potential cannot be understated. Millions of shillings circulate
between these member groups albeit in an informal setting. These monies, if managed formally
and in a corporate platform are likely to create better performance for the sake of the members,
groups and the entire economy. In recognition to the above contributions to the entire economy,
there is need to relook into the various dimensions of empowerment material, leadership
programs, cognitive, perception and relation for a sustainable growth and development.
Access to a pool of resources from individual member makes the members experience
power within displayed in increased self-esteem, some degree of independence and
confidence. At the economic level, the group member have individually made strides in reducing

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poverty levels, have acquired otherwise impossible resources for their families and have
educated their children. Socially, the members have participated to alleviate pain in times of a
peril, have made better social events for each member. Involvement in social groups has
enabled women to have a voice in the community affairs and they have been able to tackle
problems such as lack of clean drinking water and electricity as well as access to better health
facilities. An otherwise economically poor individual gains strength as part of a group. Besides,
financing through SHGs reduces transaction costs for both lenders and borrowers. While
lenders have to handle only a single SHG account instead of a large number of small-sized
individual accounts, borrowers as part of an SHG cut down expenses on travel (to & from the
branch and other places) for completing paper work and on the loss of workdays in canvassing
for loans. To meet the credit needs of the poor by combining flexibility, sensitivity and
responsiveness of the informal credit system with the strength of technical and administrative
capabilities and financial resources of the formal credit institutions.

Statement of the problem

The self-help groups forms part of lifestyles in most of developing countries. 80% of adults in
Kenya belong to one form of self-help group to another (Kinyanjui, N. 2010).Such groups
primarily form to improve living standards of the members. Groups undertake a wide variety of
social and economic activities founded on savings and credit schemes, income diversification.
Individuals joining a SHG expect to share social and economic risks, alleviate poverty, generate
income through entrepreneurial activities as well as make major investments that enhance
personal economic growth and development. The potential in such groups is enormous if only
its tapped and directed to achieve desired results (Karnani A 2011).
Despite this high vision, members however have little knowledge on how their objectives
shall be achieve and may not initially understand how to govern or how they should be
governed and what activities they have to pursue to achieve their perceived and desired goals.
Their activities and operations therefore continue to be adhoc and they all become takers of
what comes. Majority of these group member lack appropriate training and education to make
feasible investment decisions.
Sustainability and economic development strategies may be beyond their thinking and
as such many spend years on edge doing the missionary traditional activities that bring no
desired or perceived benefits. As such many group members get disillusioned, and all they do is
move from one group to another or disintegrate. Irrespective of this gloomy scenario, the
potential possessed by these groups cannot be under estimated. They have the financial

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capacity, the commitment, human resource and the time to create social, economic and political
mileage if only all these resources are well governed and focused.
From studies done, Its observed that a minority of SHGS, like Kenya women finance trust
(KWFT), Jamii Bora trust, heifer international and a few others in Kenya have able to achieve
their perceived goals and make remarkable contributions in the lives of their members and have
been able to transform to major economic empires. The kind of leaderships and style of
governance observed in these succeeding SHGS is biased towards corporate governance.
They have commercialized their operations and moved completely out of the traditional chamas
outlook. Is it possible that corporate governance is the key that makes the difference?
The study sought to understand the effects of corporate governance on the performance
of SHGs in terms of capital growth, assets acquisition and personal and group development.

Justification of the study

The last two decades have seen many African governments and other stake holders take keen
interest in the operations of SHGS. This is in recognition of the potential these groups hold. The
stakeholders and the government have created financial programmes that target these groups
and a lot of funds have been channeled to them. Its therefore paramount that these groups
change their traditional ways of operations which research has shown its weaknesses and
adapt to strategic governance to achieve better results. As such, this study shall create an
understanding on good governance strategies to the government, investors and the SHG
Smembers to achieve desired results for all.

Scope of the study

The study shall involve ten SHGs operating in Thika town and its environs. It shall focus on the
performance of these groups for the last five years in terms of capital gain, asset gain, personal
and group development.

General objective
Analyzing the effects of corporate governance on the performance of SHGs

Specific objectives
1. Evaluating the effects of transformational leadership on performance of SHGs
2. Analyzing the role structural governance on performance of SHGs
3. Investigating the effect of training on performance of SHGs
4. Analyzing the role of empowerment on performance of SHGs

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Hypotheses
Hoi : transformational leadership has no significant relationship to positive performance of SGHs
Hoii: structural governance has no significant relationship to positive performance of SHGs
Hoiii training has no significant relationship to positive performance of SHGs
Hoiv empowerment has no significant relationship to positive performance of SHGs

LITERATURE REVIEW
Theoretical Framework
Corporate governance is the establishment of a system of rules, practices and processes by
which a company is directed and controlled. It specifically involves balancing the interests of the
many stakeholders that forms the membership of the organisation. It is a process of regulating,
controlling, coordinating and manipulating the firms or any form of economic and non-economic
activities. In the terms of a SHG, corporate governance can include a framework of rules and
regulations that ensures conformity, accountability, fairness, equity and transparency in the
operations of the group.It is a set of procedures and defined responsibilities that govern the
group.

Agency theory
This theory explains the relationship between the owners of the organization and the agents that
work for the organization. There is always a conflict that arises when the desired interests and
goals of the owner contradicts those of the agents and the owner is not able to specify them.
Similarly there is the conflict of attitude towards risk tolerances. The members of SHGs depend
on the elected leaders who frequently will seek this position to drive personal agenda. They
often take advantage of the illiteracy levels of the members who cannot articulate their desires,
cant demand accountability and compliance to the groups guidelines. If these groups are to
achieve desired results, the leaders must separate their personal interests, and have similar
attitude towards risk during investments.

Resource Dependence and Stewardship Theory

Resource dependence ideas were originally developed by Pfeffer and Salancik (1978. Unlike
agency theory, their original ideas were inductively derived from empirical studies. Their key
contribution is the observation that the board, and in particular the constitution of the non-
executive element of a leaders , can provide the organisation with a vital set of resources:
'When an organization appoints an individual to leadership, it expects the individual will come to
support the organization, will concern himself with its problems, will variably present it to others,

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and will try to aid it' (1978:173). Seeing the leaders as a source of resources for an organisation
opens up a very different way to think about the leaders role in creating high performance.
(Hilman and Dalziel 2003). This phenomena is an ideal situation for any SHG and if enhanced
through training, the performance of these groups can be enhanced tremendously (Schwab P.
2001).

Stewardship theory
Contrary to agency theory's pessimistic assumptions about the self-interested and self-serving
motives of leaders, stewardship theory suggests the potential for what it calls the 'pro-
organizational' motives of leaders. What drives performance here is not the aligned greed of a
leader but their personal identification with the aims and purposes of the organization.
This theory assumes that there is an alignment of the leaders interest to those of the
organization. This would really work for the SHG in Kenya and elsewhere due to the fact that
the groups depend heavily on the goodwill of their leaders. In deed the performance of any SHG
is dependent on the propriety of its leaders. They are capable of creating the right atmosphere
for corporate performance.

Stakeholder Theory
Stakeholder theory challenges agency assumptions about the primacy of members interests in
the case of SHGs. It argues that an organization should be managed in the interests of all its
stakeholders. These interests include not only those of the shareholder but also a range of other
direct and indirect interests. The SHGs have a wider membership scope that the principal
member. They are made of social circles including family members, friends and neighbors. All
these stakeholders will suffer if the principal member suffers. It is therefore paramount that the
leaders embrace the stakeholders agency principle. These ideas were originally developed by
Ed Freeman in the 1980s, but have achieved a wider currency in the United Kingdom although
in the corporate company to achieve desired performance. In terms of corporate governance it
is argued that, were executives not made accountable to all of the companys stakeholders they
would, in effect, be answerable to none. Enlightened stakeholder theory therefore suggests the
practical value of accountability to shareholders.

EMPIRICAL REVIEW
Majority of SHGS engage in a variety of activities with a common denominator of poverty
alleviation and women empowerment. Some are registered while others are not. Despite their
adhoc operations, lack of basic education or training these groups control millions of shillings. A

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number of governments are oblivious of the potential of these common set ups and hence have
not come up with policy guidelines to assist in proper corporate governance to achieve better
results, a number of SHGs have in the recent past attracted nongovernmental organisations
assistance and have achieved tremendous economic and social gains. For instance the BOMA
project in the rural Pokot Kenya achievements cannot be underestimated.
The BOMA Project is a U.S. no-profit and registered Kenyan NGO with a proven track
record, measurable results and a transformative approach to alleviating poverty and building
resiliency in the arid lands of rural Africa. Todate, The BOMA Project has launched 1,380 micro-
enterprises across Northern Kenya, impacting the lives of 4,668 adults who use the income and
savings to support 23,340 children. Total impact: More than 28,000 women and children lifted
out of extreme poverty. The project operates under its founder member CEO Kathleen Colson.
This NGO under their initiative in the name of rural entrepreneurs access project
(REAP)replaces aid with sustainable income and helps women to graduate from extreme
poverty by giving them the tools they need to start small businesses in their communities.
With this new and diversified source of income, they can feed their families, pay for school fees
and medical care, accumulate savings for long-term stability, survive drought and adapt to a
changing climate. Kathleen Colson on lets talk TV show : July 18 2012, hosted by
SalleyGibney, explains how BOMA has helped 4,668 women in Northern Kenya to graduate
from extreme poverty through a two-year program that offers a $150 grant, hands-on mentoring,
and training in business skills and savings (See appendix i).
However, without watering down the achievements made by the above groups, majority
of women self hep group in Kenya continue to operate in their missionary style i.e. meet
monthly, contribute money that go to merry go -round activities. They are caught up in that
web for decades and lack understanding on how they can free to operate in a more
economically viable manner .they are content with their small status that guarantees them of
social meetings and a small income. These become the target of this study to free the member
from the circus.
Both scenarios are not only prevalent in Kenya but in all parts of the world, for instance
the Government of India and state authorities alike have increasingly realized the importance of
devoting attention to the economic betterment and development of rural women in India. The
Indian Constitution guarantees that there shall be no discrimination on the grounds of gender. In
reality, however, rural women have harder lives and are often discriminated against with regard
to land and property rights and in access to medical facilities and rural finance. Women
undertake the more onerous tasks involved in the day-to-day running of households, including
the collection of fuel wood for cooking and the fetching of drinking water, and their nutritional

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status and literacy rates are lower than those of men. They also command lower wages as
labour: as rural non-agricultural labourers, women earn 44 rupees per day compared to 67
rupees for men. Womens voice in key institutions concerned with decision making is also
limited. In 2007, only 8 per cent of all seats in the national parliament were occupied by women.
As such the government has engaged institutions and non -governmental organisations to run
programmes to empower women. In Tamil Nadu (India), the role of women has in the last one
decade changed from that restricted to caring for children and housekeeping to one running
vibrant women groups. In this town of Tamil, for example 73 women groups have been formed
in 59villages with a total membership of 2167. The government in India says that the creation of
women groups constitute the backbone of its work as a way to develop village communities and
empower women socially, economically and politically. NABARD (a banking linkage institution
in India ) estimates that there are 2.2 million SHGs in India, representing 33 million members,
The aim has been to unite women villagers to campaign for better rights and an increased role
in decision making. Strategies are discussed to improve the education, health care and
economic status of the people.
Many self-help groups, especially in India, under NABARD's SHG-bank-linkage program,
borrow from banks once they have accumulated a base of their own capital and have
established a track record of regular repayments.
This model has attracted attention as a possible way of delivering Micro finance services
to poor populations that have been difficult to reach directly through banks or other institutions.
"By aggregating their individual savings into a single deposit, self-help groups minimize the
bank's transaction costs and generate an attractive volume of deposits. Through self-help
groups the bank can serve small rural depositors while paying them a market rate of interest.
NABARD estimates that there are 2.2 million SHGs in India, representing 33 million
members that have taken loans from banks under its linkage program to date. This does not
include SHGs that have not borrowed. "The SHG Banking Linkage Programme since its
beginning has been predominant in certain states, showing spatial preferences especially for
the southern region Andhra Pradesh, Tamil Nadu, Kerala and Karnataka. These states
accounted for 57 % of the SHG credits linked during the financial year 2005-2006.
Womens empowerment has long been a central feature of the partnership between
IFAD and the Government of India. Key instruments for supporting womens empowerment are
self-help groups, whereby 10-20 rural women from the same village, mostly poor women, come
together to contribute two-weekly or monthly dues as savings and provide group loans to their
members. The self-help group approach was not created by IFAD-supported operations, but
IFAD has contributed to the mainstreaming of this approach in India and to financing

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programmes for promoting self-help groups in states such as Tamil Nadu and Maharashtra
supported by the Womens Development Corporation, an arm of the State Government involved
in supporting womens development.
The government of India has importantly helped self-help groups establish links with
microfinance institutions and commercial banks. For example, the Firsipur branch of the Bank of
Maharashtra is financing more than 400 self-help groups in the district, lending on average
about US$1,600 per group. The bank has set up its own in-house NGO to support these efforts.
Loans are provided only to the groups, not individuals (although the groups normally on-lend to
individual members). Recovery rates on the loans stand at 99 per cent. In addition to lending to
self-help group, which is profitable for the bank, ancillary business has been brought in through
self-help group members opening deposit accounts and taking loans as individuals. The impact
of the commercial banks links to self-help groups is attested to by members. In Urali Devachi
village (mentioned in the box), members loans have provided the wherewithal to purchase a
flour mill, and the working capital for a market stall selling refreshments and a shop selling saris.
Members have used the loans to pay off moneylenders, and for education and health needs.
The UNDP has identified strategies empowerment i.e. social mobilization and collective
responsibility. The organization argues that women often lack or are denied the basic
capabilities and self-confidence to counter and challenge existing disparities and barriers
against them. They also lack recognition by all stakeholders among economic drivers.
In this view, there is need for the creation of an agent to consciously catalyze social
mobilization. Social mobilization needs to be guided to achieve sustainable activities, projects
and development complemented by economic security. As long as the disadvantaged suffer
from economic deprivation and livelihood insecurity, they will not be in a position to mobilize
(UNDP 2001). In many developing countries (especially in South Asia), one strategy which has
been found to be promising is participatory institution building into he self-help groups, often
coupled with savings and micro credit loans (ESCAP, 2002). Mayoux, (1995) has identified
three paradigms on micro-finance and gender. The financial self-sustainability paradigm,
currently dominant within most donor agencies and USAID, World Bank, UNDP, etc. assumes
that increasing womens access to micro-finance services will lead to individual economic
empowerment, well-being and social and political empowerment.
It provides little opportunity for client participation, group self-management or autonomy
(Rahman 1999; Mayoux1995). The Poverty alleviation paradigm has its rationale for targeting
women, because of higher levels of female poverty and womens responsibility for household
well-being. The feminist empowerment paradigm is based on a mutual or self-help approach
pioneered in India in the early 1980s. It is rooted in the development of some of the earliest

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micro-finance programmes in the South, particularly SEWA and WWF in India. It emphasizes
high levels of group ownership, control and management. Mayoux argues that the very process
of taking decisions within the group is an empowering process and so can lead to broader
development outcomes, such as the greater participation of women in local government
processes, and so on.4A self-help group consists of 10-20 members drawn from a relatively
homogeneous economic class (i.e. poor), self-selected on the basis existing affinities and
mutual trust; members meet regularly at a fixed time and place and pool their savings into a
common fund from which they take need based loans. The group develops its own rules and
regulations and sanctions for violations; the meeting procedures and processes, leadership
change norms, intensive training and handholding, are designed to enable SHGs to function in a
participatory and democratic manner. The objectives of the SHGs go beyond thrift and credit
and include the overall development of members in the social, political, cultural and economic
arena; thus the SHGs are credit plus institutions (Fernandez, 1998).
The world banks empowerment and poverty eradication: a source book, defines
empowerment in its broad sense as the expansion of freedom of choice and action (Narayan,
2002). It has suggested that empowerment of women should be a key aspect of social
development programs (World Bank, 2001). United Nations (2002) defines empowerment as the
process by which women take control and ownership of their lives through expansion of their
choices. It is a process by which the long term marginalized gender acquire power to explore
and experiment, define own goals and act upon them (Kabeer, 1999).There is a clear indication
that better performance can be achieved through proper governance of SHGS. There is a lot of
entrepreneurship capability within these groups that can be tapped to create sustainable
development. According to Howell, Jane M.; Avolio, Bruce J. (1993), Transformational
leadership, transactional leadership, locus of control, and support for innovation are the Key
predictors of consolidated-business-unit performance. It has been argued that transformational
leaders increase group effectiveness by empowering followers to perform their job
independently from the leader, highlight the importance of cooperation in performing collective
tasks, and realign followers values to create a more cohesive group.
A study conducted by Jane, Bruce and Avolio on 73 managers revealed embracing
transformational leadership strategies made three organizations led by these transformational
managers perform better in profitability, productivity , capital and asset base growth . The study
also wanted to examine whether transformational leadership would be positively related to
followers perceptions of empowerment, group cohesiveness, and effectiveness. Forty-seven
groups from four Korean firms participated in this study. Results of partial least squares analysis
indicated that transformational leadership was positively related to empowerment, group

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cohesiveness, and group effectiveness. Empowerment was positively related to collective-

efficacy, which in turn was positively related to group members perceived group effectiveness.
(PsycInfo Database Record 2012, Ndikumana L, Boyce JK 2011).

Study on structural
Many scholars have advanced the argument that creating a governance structure in any entity
is the gateway to performance. This prepares the entity to consistently address and respond
proactively to external factors and this has a bearing on its path to creating sustainable growth
and development. Its noted that well governed entities largely perform better and that good
corporate governance is of essence to firms (Miringu Alice N.1, Muoria Esther, 2011). This is
however a new concept to the African Chama setting although in the recent decades, it is
being embraced in most African countries like Ghana, south Africa and Asia (Berglof and Von
Thadden, 1999). According to Bebchuk, L., Cohen, A. and Ferrell, A. (2004), there is a very high
positive correlation between corporate governance and entitys performance. Research has
shown that corporate governance strengthens efficiency, leader responsibility, transparency,
honesty, integrity and accountability (Miringu Alice N.1, Muoria Esther, 2011).

Training and Empowerment

Though the SHGS have managed to access to credit, circulate millions of shillings, attend to a
milliard of social welfare needs, their performance have continuously remained below desired
levels. According to Kumar& Krishnamurthym, (2013), training and Development function plays
a significant role in energizing and empowering human resources by increasing their skills
through innovative and productive programmes. Women self-help groups are at present playing
a vital role in the personality and skill development of women in many economies. Training in
management, entrepreneurial skills and leadership provide the women with the required skills
and attitudes that helped them propel their groups into tremendous heights economically and
socially. It is suggested that adequate technical skills and finance should be provided to create
right capacity for financial decisions.

Transformational leadership
Wikipedia defines transformational leadership as a style of leadership where the leader is
charged with identifying the needed change, creating a vision to guide the change through
inspiration, and executing the change in tandem with committed members of the group. It
serves to enhance the motivation, morale, and job performance of followers through a variety of
mechanisms. These include connecting the follower's sense of identity and self to the project

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and the collective identity of the organization; being a role model for followers in order to inspire
them and raise their interest in the project; challenging followers to take greater ownership for
their work, and understanding the strengths and weaknesses of followers, allowing the leader to
align followers with tasks that enhance their performance. This concept articulates what is really
required from SHG leaders (Judge, Timothy A.; Piccolo, Ronald 2004).

Conceptual framework

Figure 1. Conceptual framework

Corporate governance SHG Performance

Transformation Investment portfolios
leadership Income generation
Corporate structure Poverty index
Training Entrepreneurial activities
Empowerment Risk management

Group cohesion
Education levels
Government policies

Independent variables: Transformation leadership, corporate structure, Training,

Empowerment are the variables that may influence positively or negatively the change on the
dependent variables.

Dependent variables: Investment portfolios, Income generation, Poverty index, Entrepreneurial

activities ,Risk management . These variables change with the change of the independent
variables. The change may be direct or inverse.

Moderating variables: The researcher acknowledges that Group cohesion, Education levels of
the members and leaders of SHG and Government policies may influence the relationship
between the independent and the dependent variables. However due to time constraints, the
researcher did not focus on these moderating variables

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RESEARCH METHODOLOGY
Research Design
The study adopted exploratory design. This design enabled the researcher integrate the
different components of the study in a coherent and logical way, thereby, ensuring effective
address to all the research questions.

Target population
The study population consisted of all the members of 10 self-help groups that are registered
with the sub county social services department. They have a standing total membership of 244
women and are operating in Thika Town and its environs.

Sample and Sampling Technique

A sample denotes subjects selected from the target population to be included in the study.
Sampling is the process of selecting a particular subset of subjects from a larger population with
whom to conduct the study (William, 2003). To establish the sample size, Yamane formula with
an error margin of 5% was used (Yamane, 2004).
This study applied stratified sampling technique to ensure all the 10 groups are
represented (Cooper et.al 2013). Through stratified simple random technique, the researcher
selected 30% of the members to form a total of 73 respondents. This is representative enough
sample according to Fishers et al 1998; Kothari, 2008.

Table 1: Sample size

S/No. Target Groups Membership Sample Size
1 Mwangaza women group 30 10
2 T-Skats self-help group 21 6
3 Visionary ladies SHG 24 7
4 Tangaza self help group 28 8
5 Nyakati self-help group 20 6
6 Amazing mothers 18 5
7 Thika teachers SHG 28 8
8 Umeme SHG 25 8
9 Millennium SHG 22 7
10 Happy Valley SHG 28 8
TOTAL 244 73

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Data Collection Procedures

The study utilized primary data using Questionnaire (see Appendix i). The researcher self-
administered questionnaires for primary data collection through drop and pick method.. The
drop-and-pick-later' approach was found useful to give the respondent time to think through the
questions.

Data Analysis and Presentation Procedure

The process of data analysis involved several stages. Here, completed questionnaires were
edited for completeness and consistency. The data was then coded and checked for any errors
and omissions (Kaewsonth and Harding, 1992). The data was analyzed using SPSS package
version 20.0. Results were presented using descriptive statistics. Correlation coefficient and
regression were used to analyze the relationship between corporate governance and
performance of self-help groups.
The research was guided by the model ; y=0 +1x1+2x2+3x3 +4x4+ e,
Where;
y=SHG Performance
x1=Transformation leadership
x2=Corporate structure
x3=Training
x4=Empowerment
e= error margin

RESEARCH FINDINGS
Approximately 100 questionnaires were distributed to the various women groups. Out of that
number,68 filled questionnaires were responded and collected for analysis which was 93%
response rate (See Appendix iii).

Objective one: Evaluating the effects of transformational leadership on performance of

SHGs
68 out of 73 respondents returned the questionnaires. They were asked if their leaders are able
to communicates growth ideas articulately 11% strongly agreed, 55%agreed, 3% remained
neutral, 18% disagreed and 14% strongly disagreed. This shows that majority agreed on this
fact. The respondents were asked to respond on the risk taking tendencies of their leader and
as indicated above, majority said she takes risks easily. A total of 38% either strongly agreed or
agreed on the fact that they can predict their leaders actions. However 50% remained neutral

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and 12% disagreed to this fact. The respondents were asked if they always receive contingent
reward for good performance. A total of 62% strongly disagreed and only 38 agreed to this fact.
Its clear that the leaders do not motivate the members t participate more in the group may be
since the attitude is that they are in the group in their own resolve and do not need to be
motivated to participate. Asked if their leaders controls the expenses very well, 86% disagreed.
Only 14% agreed. Majority of the members felt that the leaders are not very good in spending.
Asked if their leaders offer a purpose and define short-term goals, 71% agreed on this fact while
10% remained neutral and 19% disagreed. The respondents were asked if they always
identifying with the needs of the leader, 46%agreed while 40% disagreed and 14 % remained
neutral. 71% reported that their leader is charismatic and inspires/ motivates them, 10%
remained neutral and 19% disagreed. Asked if they admired the ways that their leaders cause
followers to identify with them,70% agreed while 30% disagree. The members were asked if
their leaders makes them have a strong conviction and a stands on issues, 55% disagreed,
while 35% disagreed. 10% were neutral. Is your leader able to articulate our vision that is
appealing and inspiring to followers? To this 46% agreed, another 46% disagreed and 8%
remained neutral.
In general, majority disagreed with most of the statement, indicating that the leaders did
not score well in most of the criteria.

Objective two: Analyzing the role of training and structural governance on performance
of SHGs.
From the 68 respondents, 79% said that their groups disagreed that thy plans for every
investment to be undertaken, 21% agreed to this fact. Asked if their group has a formal
leadership structure, 60%disagreed wile a minority of 40% agreed. Asked if the financial
decisions are discussed formally, 74%agreed while 26% disagreed. Asked if they are able to
make good choices on investment portfolio, a majority of 84% disagreed . only 16% agreed to
this fact. This means that investments are adhoc. The members were asked if their leader is
good at resource mobilization and a total of 63% disagreed 20% remained neutral while 17%
responded positively. Asked if Budgeting is taken seriously in their group, a majority of 78%
disagreed , 12% were neutral and only 10% agreed. The members were to respond of if their
group has insured the members interests . a total of 84% disagreed, 13% remained neutral and
only 3% agreed to this fact. Asked if the group members are trained on book keeping,
management and leadership, a majority average of 80% disagreed 6% remained neutral and
14 % agreed to the facts. Asked if training is programmed and executed regularly, 92%

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disagreed and only 8% agreed to this fact. From the findings, its obvious that these groups lack
training on most of the skills that would make them perform better.

Objective three: Investigating the effect of empowerment on performance of SHGS

On empowerment, the members were asked if there is reported increase on incomes in their
group, 54% agreed, 37 remained neutral and 7% disagreed. Asked if the assets value have
gone up by 5% for the last one year, 68% agreed, 20% were neutral while12% disagreed. Have
your group received some funds from the government in the last one year? To this a majority of
78%agreed, 15% remained neutral and only 7% disagreed. The respondents were asked if their
investments have increased in the last one year and a whole of 37% remained neutral, 20%
agreed while 43%disagreed. Asked if the member has acquired some asset through the group,
only 34% agreed while 66% disagreed. They were asked if the member has improved own
incomes in the last six months, and a majority of 57% agreed, 29 % remained neutral while only
14% disagreed. Asked if they have attended some training in the last one year, and 79%
disagreed, 13% were neutral and 8% disagreed. Have you been able to finance for your
childrens education for the last one year?. To this 52% agreed, 20remained neutral and 28%
disagreed. Asked if they have been involved in decision making process in the group, a majority
of 61% agreed 12% remained neutral while 27% disagreed. Are you contented with the groups
performance? The respondents were asked. To this, 58% agreed, 29% remained neutral while
13%disagreed. An observation is made that to many statements, quite a number remained
neutral. This could be due to the fact that the statements touched on personal gains and
majority were not comfortable with disclosing this information. In general however, the
performance of the group and that of the individual respondent is average.

Multivariate Regression Analysis

Regression analysis is a statistical tool that identifies the relationship between a number of
variable : a dependent variable whose value is predicted by multiple variables. By the use of the
model Y=0 +1x1+ 2x2+ 3x3 + 4x4+ 5x5+ e

Table 2. Model Summary

Model R R Square Adjusted R Square Std. Error of
the estimate
2
1 .898 .806 .728 .53636

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Table 3: Regression Analysis Summary

Model Unstandardized Standardized T sig
coefficients coefficients
B Std. Beta
Error
1 Constant 1.478 .541 2.733 .008
Transformation leadership .763 .067 .098 11.3380 .009
Corporate structure .546 .096 .106 5.6875 .021
Training .588 .088 .179 6.6818 .21
Empowerment .672 .094 .131 7.1489 .038
a.Dependent variable ; performance of SGH ;Investment portfolios, Income generation ,Poverty index
Entrepreneurial activities ,Risk management
b.Predictors: (constant), Transformation leadership, Corporate structure, Training, Empowerment

Table 3 presents the results of multivariate regression on the performance of SGH based on
predictor. Holding all the variables constant, transformational leadership will cause .763
increase of SGH performance , while corporate structure, training and empowerments will cause
.546,.588 and .672 performance increase respectively .

SUMMARY OF FINDINGS
The researcher focused to answer four questions as follows; is there a relationship between
transformational leadership and performance of SHGs, what is the role structural governance on
performance of SHGs, what is the effect of training on performance of SHGS and what is the
role of empowerment on performance of SHGS. From the findings, it was clear that the leaders
of the groups lacked most of the transformational leadership traits. They were not able to
communicate the vision to members, provide no Contingent reward, low rating on risks taking.
They were however rated high on Charisma and having personal conviction. They also assist
members to take a stand the groups issues although members failed to predict their leader job
performance.
Similarly, findings revealed that the groups lacked the capability of making right decision
on investment portfolio, did not budget their expenses and had not managed any improvement
in the last one year. Most groups had not undertaken any formal training on leadership or
management. They had no knowledge on corporate governance and most of their activities
were not planned but adhoc. From the regression analysis findings, it clear that
Transformational leadership contributes most to performance, followed by empowerment ,
training and finally corporate structure.

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CONCLUSIONS AND RECOMMENDATIONS

From the findings, the researcher observes that the groups have great potential. They have
enough capital from the members contributions, government agencies and other financial
providers. However they lack the corporate governance outlook. They continue to operate
traditionally emphasizing on merry-go-rounds and adhoc investments and activities. As such
their level of growth is minimal if any. Self-help groups should embrace and emphasis on
transformational leadership and empowerment. This shall in deed create better performance.
The researcher recommends that the groups should undertake training on management
and leadership. The government should have a policy that demand proper and relevant training
to any group that seeks its funding and that the funded groups or individuals monitored to
ensure progress.
Systems should be established to ensure the capturing of 100% revolving fund
programme is achieved
Other stakeholders like universities should develop short courses targeting the self-help
groups on relevant fields like Management, Leadership, Risk Management, Accounting and
Investment Portfolio.
The government agencies to create appropriate network infrastructures to ensure that
the funded groups are mentored and coached by other performing entrepreneurs. The SGHs
should really embrace transformational leadership since it contribute most to the performance

REFERENCES
Bernard M. Bass(2003) From transactional to transformational leadership: Learning to share the vision.
Glennie J(2008). The trouble with aid: Why less could mean more for Africa. London: Zed books.
Judge, Timothy A.; Piccolo, Ronald (2004) transformational and Transactional Leadership: A Meta-
Analytic Test of Their Relative Validity.
Justin Y., C. Monga (2011) Growth Identification and Facilitation: The Role of the State in the Dynamics
of Structural Change, World Bank Working Paper No. 5313; Radosevic, S.
Karnani A (2011). Fighting poverty together: Rethinking strategies for business, governments, and civil
society to reduce poverty. New York: Palgrave Macmillan.
Kinyanjui M J(2012). Vyama, institutions of hope: Ordinary peoples market coordination and society
organization. Oakville, Ontario, Canada: Nsemia Inc. Publishers.
Mary NjeriKinyanjui (2014). Women and the Informal Economy in Urban Africa, From the Margins to the
Centre.
McLeod S. (2007). Maslow's hierarchy of needs. Retrieved on April 31st, 2013 from
http://www.simplypsychology.org/maslow.html.
Ndikumana L, Boyce JK (2011).Africas odious debts: How foreign loans and capital flight bled a
continent. London: Zed books.
Schwab P. (2001). Africa: A continent self-destructs. New York: Palgrave Macmillan

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APPENDICES
Appendix I: QUESTIONNAIRE
You have been selected to participate in this research to try and improve the performance of SHGS in the
Kiambu County. Kindly respond as accurately as possible to the two parts of this questionnaire.

PART ONE
Your name (Optional)
Name of your SHG
How long have been in this group?
Between;
1-5 years
5-10 years
0ver 10years

When did your group register with the department of social services?.....................................
What was your objective of joining this group ............................................................................

On a Linkert scale of 1-5, respond to the statement by choosing 1 strongly agreed, 2 agreed, 3 neutral,
4agreed, 5 strongly disagreed. Use a tick ( )
TRANFORMATIONAL LEADERSHIP
S/No. Statement 1 2 3 4 5

1 My leader communicates articulately the ideas for growth and tasks

or risks involved.
2 I can Predictmy leader actions
3 We always receive contingent reward for good performance
4 My leader controls the expenses very well
5 Our leaders offer a purpose and define short-term goals
6 I always identifying with the needs of the leader
7 Our leader is charismatic and inspires / motivates us .
8 admirable ways that cause followers to identify with the leader
9 She makes us have a strong conviction and a stands on issues
10 She is able to articulate our vision that is appealing and inspiring to
followers

On a Linkert scale of 1-5, respond to the statement by choosing 1 strongly agreed, 2 agreed, 3 neutral,
4agreed, 5 strongly disagreed.use a tick ( )
TRAINING AND STRUCTURAL GOVERNANCE
S/No. Statement 1 2 3 4 5
1 my group plans for every investment to be undertaken
2 My group has a formal leadership structure
3 The financial decisions are discussed formally
4 We are able to make good choices on investment portfolio
5 Our leader is good at resource mobilization
6 Budgeting is taken seriously in my group
7 My group has insured the members interests in the group
8 The group members are trained on book keeping
9 My group is trained on management and leadership
10 Training is programmed and executed regularly

On a Linkert scale of 1-5, respond to the statement by choosing 1 strongly agreed, 2 agreed, 3 neutral,
4agreed, 5 strongly disagreed. Use a tick ( )
EMPOWERNMENT AND PERFORMANCE
S/No. Statement 1 2 3 4 5

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1 There is reported increase on incomes in my group

2 The assets value have gone up by 5% for the last one year
3 We have got funds from the government in the last one year
4 Our investments have increased in the last one year
5 Each member has acquired some asset through the group
6 Each member has improved own incomes in the last six months
7 I have attended some training in the last one year
8 I have financed my childrens education for the last one year
9 I have been involved in decision making process in the group
10 I contented with the groups performance

Appendix II
From the BOMAS dash board the success story can be seen
PARAMETER CHANGE IMPACT ON WOMEN AND CHANGE
CHILDREN AT ONE YEAR
New businesses launched since 2008 1,380 Children attending school 78% increase
New business owners 4,668 Made home improvements 95%
Business skills training sessions 73 Built a latrine 20%
Dependent children impacted 23,340 Enrolled in literacy programs 41%
Savings groups launched 176
Savings training sessions 32
Businesses in operation after one year 99%
Businesses in operation after three years 97%

Appendix III
S/No. Target Groups Membership Sample Size Responses
1 Mwangaza women group 30 10 10
2 T-Skats self-help group 21 6 5
3 Visionary ladies SHG 24 7 6
4 Tangaza self help group 28 8 7
5 Nyakati self-help group 20 6 6
6 Amazing mothers 18 5 5
7 Thika teachers SHG 28 8 8
8 Umeme SHG 25 8 7
9 Millennium SHG 22 7 6
10 Happy Valley SHG 28 8 8
TOTAL 244 73 68

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