Prudential Regulation and Survival of Financial Cooperatives in Uganda: The Mediating Effect of Board Role Performance
Abstract
Financial Cooperatives, also called Savings and Credit Cooperatives (SACCOs) encounter substantial survival challenges in Uganda, often linked to regulatory and governance issues. This study empirically investigates the mediating role of board role performance in the relationship between regulatory compliance—focusing on prudential requirements such as capital adequacy ratios, liquidity
ratios, and borrowing limits—and SACCO survival. Adopting a quantitative, cross-sectional survey design, data were gathered from 311 respondents, including board members and senior management across 60 SACCOs. Structural equation modelling shows that regulatory compliance alone does not directly improve SACCO’s survival prospects but significantly enhances board role performance, which, in turn, correlates positively with survival indicators like liquidity and gearing.
The study's findings suggest that effective board role performance plays a significant mediating role in translating prudential regulatory compliance into positive survival outcomes for SACCOs. The study recommends that SACCOs, and by implication policymakers, prioritize capacity-building initiatives aimed at enhancing board role performance, recognizing its role in mediating the relationship between prudential regulatory compliance and SACCO survival outcomes. Additionally, providing targeted support to SACCOs in meeting specific regulatory requirements—such as capital adequacy, liquidity thresholds, and borrowing limits, may further strengthen the association between compliance and survival outcomes. A key theoretical contribution of this study is
its integration of Institutional Theory with Role Theory, offering deeper insights into the relationship between adherence to prudential regulations and SACCO survival, while emphasizing board role performance as a critical mediator in reinforcing the stability of Uganda’s financial cooperative sector.
Key Words: Regulatory Compliance, Prudential Regulations, Board Role Performance, Organisational Survival, SACCO
