Effect of Membership Diversity on the Financial Performance of Agricultural Cooperatives in Kenya

Abstract

This study explored the impact of social inclusion in member participation on the financial performance of agricultural cooperatives in Kenya, emphasizing the role of legislative frameworks in moderating this relationship. Social inclusion in member participation refers to the extent to which cooperative members are actively involved in decision making processes and organizational activities. This research aimed to assess whether increased social inclusion among members could enhance financial performance and whether legislation influences this effect. The study utilized quantitative methods to analyze data from 31 agricultural cooperatives in Kiambu and Kajiado counties, focusing on a sample of 57,640 members. The financial performance of these cooperatives was evaluated over a five-year period (2019-2023). Regression analysis was used to examine the direct effect of social inclusion in member participation on financial performance, as well as the moderating effect of cooperative legislation. The analysis revealed a significant positive relationship between social inclusion in member participation and financial performance. The regression model showed an R value of 0.534 and an R Square of 0.285, indicating that social inclusion in member participation explained 28.5% of the variance in financial performance. The ANOVA results confirmed the statistical significance of this relationship, with an F-value of 159.758 and a p-value of 0.000, suggesting that more inclusive participation practices are associated with better financial outcomes. Furthermore, the study assessed the moderating effect of legislation on this relationship. The moderating model produced an R value of 0.561 and an R Square of 0.314, indicating a slight increase in explanatory power. The ANOVA results showed an F-value of 183.836 and a p-value of 0.000, highlighting that while legislation had a significant moderating effect, the impact was not substantial. This suggests that while legislative frameworks do influence the relationship between social inclusion in member participation and financial performance, the primary driver of improved financial outcomes remains the level of member involvement. In summary, the study demonstrates that social inclusion in member participation positively affects the financial performance of agricultural cooperatives. Although legislation does moderate this relationship, its effect is relatively modest. The findings underscore the importance of fostering inclusive participation among cooperative members to enhance financial performance and provide insights for policymakers and cooperative leaders to develop supportive legislative frameworks that complement member engagement strategies.