Abstract:
As suppliers of wholesale commercial funds to savings and credit co-operative societies
(SACCOS) for on-lending to their clients, banks are key stakeholders. According to the
agency theory, banks influence the operations of SACCOS. However, empirical knowledge
remains scant on the measures banks apply to control these operations and on SACCOS’
governance-related reactions to bank requirements. In an attempt to fill this gap, this paper
explores measures used by banks to monitor and control SACCOS-partners in addition to
assessing SACCOS’ governance-related reactions to bank requirements. The paper utilizes
data collected through in-depth interviews held with both the management of five banks
selected primarily because of their active involvement in wholesale lending to SACCOS.
In addition 11 SACCOS linked to these five banks were selected in Tanzania and Kenya.
Thematic content analysis was used to analyse the data. The findings reveal that measures
applied by banks to monitor and control SACCOS-partners include accessing and investing
in information on SACCOS-partners and their clients, and requiring both guarantees and
forced savings. Compliance with these measures was found to result into two governancerelated reactions: 1) improved compliance with own by-laws, regulations, policies or
procedures, and government regulations; and 2) realignment and/or reduced compliance
with some of their own by-laws, policies, regulations, and procedures, and thus some of the
government regulations, to accommodate bank requirements.
Keywords: bank requirements, financial linkages
