Managerial competencies are a combination of various knowledge, abilities, and traits that are necessary for successful work performance (Karns, 1998). Henderson (2000) defines competency as the set of knowledge and abilities necessary to do a task successfully. Managing the host population and other expatriates inside the organization requires both internal and external management skills.
The savings and credit cooperatives (SACCO) industry is currently expanding quickly in east Africa as a result of the locals' extensive adaptation. As a result, the SACCOs are working hard to preserve their current level of financial performance in order to continue to be viable in the market. This has been made possible by managing credit-related risks that could jeopardize the SACCOs' profit. In Uganda, SACCOs have attracted a lot of private members to provide financial services to the underprivileged in rural and urban areas who cannot access traditional banking services from commercial banks. The rate of financial performance of the institutions increases as more local residents are served by SACCOs (Darrol, 2013). Donors have stopped providing grants for loan funding since the microfinance sector in Uganda has grown and changed into commercial SACCOs (Bank of Uganda Annual Report, 2009). Western Uganda has 6.4 million residents, most of whom work in agriculture and the region is thought to have the biggest number of community-based Sacco’s in Uganda (Ecorys, 2012).
According to Micro Finance Support Centre (MSC), SACCO performance in Uganda has continued to be unsatisfactory. The portfolio at risk for many SACCOs increased from 87–90% in 2015–2018, respectively. This fell very short of the required minimum of 10%. The coverage risk ratio decreased from 39–28% within the same time frame, indicating a worsening scenario. This is considerably less than the recommended 50% and above. However, after receiving loans from MSC, more than 20 SACCOS closed their doors in just two years due to poor management (AMFIU report, 2018). Despite significant efforts by the Ugandan government and various other stakeholders to improve SACCOS' governance and management capabilities, their performance has often lagged behind.
Basic financial and membership data was gathered from Rural SPEED and the Uganda Cooperative Alliance (UCA). These organizations reported 195 SACCO’s as existing, with a total membership of close to 1,200,000, savings mobilization of 40.3 billion UGX, share capital of 22.7 billion UGX, and loans of 19.9 billion UGX. Although total asset numbers are not accessible, it is obvious that the sector faces a liquidity crisis.
Since 2011, the number of SACCOs in the Ishaka division of Bushenyi Municipality has increased, and by the end of 2016, there were a total of seven of them. According to the Bushenyi District Commercial Officer's Report from 2016, the average profitability and liquidity for these SACCOs in 2016 was 2% and 11%, respectively. These numbers fall below the required percentage of 15% set forth in the SACCO society Act 2008. SACCOs have faced fierce competition from other businesses in the market. Despite the fact that their survival has been attributed to elements like effective controls, governance arrangements, providing microcredit to the poor, innovation and product design, ongoing member mobilization, dividend payments each year, accountability, and democratic member election, their financial performance has shown declining trends over time. Existing data shows that there has been a low loan recovery rate (78%) and a loan portfolio at risk (22%) along with liquidity issues, low savings rates, low member growth rates, low returns on investment, and poor portfolio quality (AMFIU Report, 2018). According to the AMFIU analysis (2021), Covid 19 caused a sharp fall in savings and debt repayments, among other economic issues. Particularly, in Bushenyi-Ishaka Municipality a good number of SACCO’s have collapsed notably Ishaka farmers SACCO and Ishaka United peoples SACCO collapsed.
Several researches have made an effort to explain the financial performance phenomenon. For instance, a study on "Managerial Competence and Financial Performance of SACCOs in Busoga Region, Uganda" reported a favorable correlation between these two factors. However, the results of the same study indicate that 39% of the variance in financial performance was caused by factors outside the model that was utilized. In Bushenyi District, out of the registered 73 SACCOs, majority have collapsed due to poor management a case in a point is Ishaka United Peoples SACCO in Basaja town (Bushenyi District Commercial Officer Report, 2020). This study was aimed at assessing the relationship between managerial competencies and the financial performance of SACCOs in the Bushenyi-Ishaka Municipality.
Main Hypothesis
There is no significant correlation between managerial competencies and the financial performance of SACCOs in the Bushenyi-Ishaka Municipality.
Sub Hypotheses
HO1
There is no significant correlation between Technical skills and financial performance of SACCO’s in Bushenyi -Ishaka Municipality.
HO2
There is no significant correlation between Conceptual skills and financial performance of SACCO’s in Bushenyi- Ishaka Municipality.
HO3
There is no significant correlation between Interpersonal skills and financial performance of SACCO’s in Bushenyi-IshakaMunicipality.
Literature review
Performance is an evaluation of an organization's accomplishments (Jackson, P. 2008). Financial performance analyzes how well an organization's goals are met in accordance to criteria and benchmarks assigned for each goal (Dess and Shaw, 2001). It affects the firm's profitability, capital sufficiency, asset quality, and cash available for business operations. Of the 1,200 answers to a survey on the high mortality rate of MFIs collapsing in the USA, 41% cited a lack of trustworthy managerial competencies as the primary cause, which in turn affected company success (Penrose, 1995). Hence, businesses require competent managers to assist in a timely and efficient achievement of goals.
According to one study, the major causes of new enterprises failing are absence of technical skills and personal traits, in addition to other elements including unfavorable economic conditions, ill-conceived company plans, and resource depletion. Other research have analyzed if having a high skill level contributes to profitable and high performing businesses. When these studies are combined, they show a strong link between a highly skilled workforce and organizational performance, which is typically quantified by labor productivity. For instance, one study found that the best companies in UK manufacturing hired individuals who had, on average, more education than the lower-performing companies. They also discovered that higher skill levels were linked to the creation of better-quality items and supported innovation and more complex production procedures.
Having a workforce with higher levels of competence has been shown to help businesses survive longer. A researcher for example, hypothesized that a more trained workforce in the UK was associated with a higher commercial orientation, strategic awareness, and willingness to innovate in order to maintain competitive advantage. Higher certification levels were linked to easier access to financing and a higher likelihood of firm survival in the US. Research indicates that work groups led by directive, technically skilled individuals outperform those led by non-directive, non-technically skilled individuals.
Traditional production parameters are now considered secondary because Conceptual Skills are one of the most valuable commodities available today. Conceptual skills came to be widely acknowledged as being crucial to an organization's success or failure as firms became aware of the potential skills as the most valuable strategic resource in the skills economy. As a result, during the past 15 years, conceptual talents have evolved from an emerging idea to a more prevalent role in commercial organizations (McKeen et al., 2006).
One estimate shows that conceptual skills are used in some capacity by 81% of the top firms in Europe and the United States. Therefore, the important question now is not whether to manage conceptual skills, but rather how to manage them (Lee & Choi, 2003). The relationship between conceptual skills and organizational performance has rarely been scientifically investigated by evaluating the condition of conceptual skills practice and contrasting it with specific financial performance indicators.
According to one study, interpersonal skills such as communication, handling conflict, and negative customer interactions have an impact on how well a business performs. According to one publication, "Employee interpersonal skills actually drive financial and sustainability results, According to statistics, management skills and behavior are among the abilities that, when lacking, result in insufficiency and negatively impact a firm's success. A study found that the ability to communicate effectively with others influences behavior and intent to pursue growth, which has a significant impact on revenue growth and financial performance.