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FACTORS AFFECTING THE PERFORMANCE OF MATATU SACCOS IN

KENYA: A SURVEY OF SELECTED MATATU SACCOS OPERATING IN


THIKA TOWN, KENYA

PETER SILALI MUSUNDI

RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE


REQUIREMENTS FOR THE AWARD OF DEGREE IN BUSINESS
MANAGEMENT (STRATEGIC MANAGEMENT OPTION) OF THE MOUNT
KENYA UNIVERSITY

MAY, 2015

DECLARATION
Declaration by the Student
This research project is my original work and has not been presented to any other
examination body. No part of this work should be reproduced without my consent or that
of Mount Kenya University.

Date27th June 2015

Signature.
Peter Silali Musundi
Admin. No BBM/000605/3121/14108

Declaration by Supervisor
This project has been submitted for defense with my approval as the Mount Kenya
University Supervisor.
Signature-------------------

Date--------------

Jacob K. Gititi
Lecturer Supervising

For and on behalf of the Mount Kenya University

Signature----------------------

Date---------------

Mr. Mwai
HOD -Managegement
Mount Kenya University

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DEDICATION
This research project is dedicated to my parents Mr. and Mrs. Wycliffe Musundi, family
members, my brother Alphas Musundi, Lenis and Elizabeth Nelly Musundi, Glausen
Khanianiambi, Cyril Wayongo and Douglas Misiko who encouraged and supported my
course tirelessly. To my close friends, as a way of appreciation for their support, patience
and understanding throughout the duration of this course. To you all I say thank you.

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ACKNOWLEDGEMENTS
First I give thanks to God for giving me strength and divine wisdom throughout my time
of study. I give thanks also to the Mount Kenya University, the head of department
Business Department Mr. Mwai all the lecturers, for according me such an opportunity to
train and develop managerial skills with them. Thanks to all those lecturers who were
involved in developing and shaping my destiny.
Special thanks to my lecturers, my researcher supervisor Mr. Jacob Gititi for his
unlimited guidance throughout the time of this research. Last but not least, I would like to
thank my parents, brothers and sisters for without their encouragement and support, I
would not have completed this study. Finally, I thank the entire management and staff of
selected matatu Saccos for allowing me to use their Saccos as the case study.

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ABSTRACT
The purpose of the study was to investigate factors affecting the performance of the
Matatu SACCOs in Kenya with respect to Matatu Saccos in Thika Town. The objectives
of the study were: To find out how management skills impact on the performance of
Matatu SACCOs; to find out how business skills impact on the performance of Matatu
SACCOs; to establish how matatu industry government policy impact on the
performance of Matatu SACCOs; and to find out how work environment impact on the
performance of Matatu SACCOs. The descriptive research survey design was used in this
study. The study used a target population of 340 respondents. Stratified sampling method
was used to draw samples from the selected Matatu SACCOs registered in Thika town by
the Transport License Board namely; Chania Travelers SACCO, Manchester Transport
SACCO, Kenya Mpya SACCO, Thika Road SACCO and NTK SACCO. Primary data
was collected using questionnaires. The questionnaires were self- administered to the
respondents at their place of work. The analysis of the data was done with the help of
excel. Qualitative data was analyzed by use of the content analysis. The data was
presented in form of tables, frequency distributions, percentages, pie charts and bar
charts. The study found out that majority of the respondents (70%) felt that there is lack
of managerial and entrepreneurial skills as the main cause of low performance by their
Matatu SACCOs, 85% was of the opinion that the government policies are good enough
to promote the performance of the Matatu SACCOs, insurance policies are good enough
to promote SACCO performance as indicated by 85% of the respondents, 67% stated that
the government policies on road safety increases the rate of corruption among the traffic
police 60% indicated that there are poor working conditions of the Matatu SACCO
employees as the cause of low performance in the Matatu SACCOs. The study concluded
that management and business skills have impact on the performance of the Matatu
SACCOs. Insurance policies are good as far as profitability of the Matatu SACCOs is
concerned. The concerned parties should ensure that road safety rules and regulations are
enforced in order to reduce corruption among the traffic police and increase efficiency in
this sector. The study recommended that; Matatu SACCOs should organize for training,
seminars and workshops for both the owners of the SACCOs and their employees so that
they can improve on their management and business skills. The owners of the Matatu
SACCOs are also recommended to do routine inspections of their employees as they
carry out their work so as to improve on efficiency and there improve on revenue
generation. The government is required to come up with ways of dealing with the corrupt
police officers as a way of ensuring that extortions from matatu industry is reduced to
zero. Matatu SACCOs should improve the working conditions of their employees so as to
increase on business profits. The study suggested that the same research to be conducted
in other counties so that a coherent report can be drawn for policy making in order to
improve the growth and profitability of matatu Sacco and also other factors affecting
performance of matatu Saccos also to be evaluated. The findings of the study will be
applicable to all matatu sector investors, government as a policy maker and scholars.

TABLE OF CONTENTS
DECLARATION

ii

DEDICATION

iii

ACKNOWLEDGEMENTS iv
ABSTRACT v
TABLE OF CONTENTS
LIST OF TABLES

vi

viii

LIST OF FIGURES ix
LIST OF ACRONYMS AND ABBREVIATIONS x
OPERATIONAL DEFINITION OF TERMS
CHAPTER ONE

xi

1.0 INTRODUCTION TO THE STUDY 1


1.1 Background to the Study

1.2 Statement of the Problem

1.3 Objectives of the Study

1.4 Research Questions

1.5 Significance of the Study

1.6 Limitations of the Study

1.7 Scope of the Study


CHAPTER TWO

2.0 LITERATURE REVIEW


2.1 Introduction

2.2 Review of the Related Literature

2.3 Critical Review of the Literature

14

2.4 Summary and Gaps to be Filled by the Study


2.5 Conceptual Framework

17

CHAPTER THREE 21
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16

3.0 RESEARCH DESIGN AND METHODOLOGY


3.1 Introduction

21

21

3.2 Research Design

21

3.3 The Target Population 21


3.4 Sampling Design and Sample Size
3.5 Data Collection Methods

23

3.6 Data Analysis Methods

24

CHAPTER FOUR

22

25

4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION 25


4.1 Introduction

25

4.2 Presentation of Findings


4.3 Conclusions
CHAPTER FIVE

25

43
45

5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS


5.1 Introduction

45

5.2 Summary of Findings 45


5.3 Conclusions

47

5.4 Recommendations

49

5.5 Suggestions for Further Studies


REFERENCES

51

APPENDICES

50

APPENDIX I: LETTER OF INTRODUCTION i


APPENDIX II: SURVEY QUESTIONNAIRE

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LIST OF TABLES
Table 3.1 Active Matatu SACCOs registered in Thika Town.......22
Table 3.2 Non-proportionate Sampling..23
Table 3.3 Sample Response Rate26
Table 4.4 Age of the Respondents..28
Table 4.5 Level of Education..29
Table 4.6 Number of years in the SACCO.30
Table 4.7 Level of business management and entrepreneurial skills.....31
Table 4.8 Benefits of the government policies...33
Table 4.9 Constraints brought about by the government policies..34
Table 4.10 Benefits of the insurance policies to the Matatu SACCOs...36
Table 4.11 Terms of employment...37
Table 4.12 Mode of wage payment37
Table 4.13 Average daily earnings.38
Table 4.14 Number of working hours in a day..38
Table 4.15 Are you offered any of the following allowances?...................................39
Table 4.16 Causes of low performance by the Matatu SACCOs...44
Table 4.17 Ways of improving Matatu SACCOs performance45

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LIST OF FIGURES
Figure 2.1 Conceptual Framework.20
Figure 4.1 Sample Response Rate..26
Figure 4.2 Gender of the Respondents...27
Figure 4.3 Are the government policies good enough to Matatu SACCOs?..............32
Figure 4.4 Are the insurance policies good enough to promote Matatu SACCOS?..35
Figure 4.5 Performance of the Matatu SACCOs in terms of income generation...43

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LIST OF ACRONYMS AND ABBREVIATIONS


GOK

Government of Kenya

GDP

Gross Domestic Product

ICA

International Co-operative Alliance

INTP

Integrated National Transport Policy

IPAR

Institute of Policy Analysis and Research

KIPPRA

Kenya Institute for Public Policy Research and Analysis

KNBS

Kenya National Bureau of Statistics

KRB

Kenya Roads Board

Kshs

Kenya Shillings

MOIED

Ministry of Industrialization and Enterprise Development

MTP

Medium Term Plan

NRSAP

National Road Safety Action Plan

NTSA

Natinal Transport Services Authority

PSV

Public Service Vehicle

SACCO

Savings and Credit Co-operative Society

SME

Small and Medium Enterprise

SASRA

Sacco Society Regulatory Authority

TLB

Transport Licensing Board

OPERATIONAL DEFINITION OF TERMS


Cartel

According to this research, a cartel is a combination of


independent business organizations formed to regulate or
monopolize production, pricing or marketing of goods and
services by members.

Comprehensive
Insurance

Coverage which pays to repair or replace the policy owner's


vehicle and property inside of it if it was damaged or lost due
to other agents, such as fire, theft, flood, or vandalism.

Entrepreneurship

The capacity and willingness to undertake conception,


organization, and management of a productive venture with
all attendant risks, while seeking profit as a reward.

Informal Sector

Sector which encompasses all jobs which are not recognized


as normal income sources and on which taxes are not paid

Matatus

They are minibuses used for public transport in Kenya. They


include 14, 29, 33 and 36 seat minibuses. The name originates
from when the fare on these vehicles was a flat rate of 30
cents.

Paratransit

An alternative mode of flexible passenger transportation that


does not follow fixed routes or schedules. Typically minibuses are used for paratransit service; however minivans, cars
and shared taxis provide services as well.

Public transport

It consist of a transport system in which passengers travel in


public service vehicle at a fee

Stakeholder

A person, group, organization, member or system who affects


or can be affected by an organization's actions

Third Party Insurance

Liability insurance purchased by an insured (the first party)


from an insurer (the second party) for protection against the
claims of another (the third) party.

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CHAPTER ONE
1.0 INTRODUCTION TO THE STUDY
This chapter contains background of the study, statement of the problem, objectives of
the study, research questions, significance of the study, limitations and the scope in that
order. This study investigated the factors influencing the performance of the Matatu
Savings and Credit Cooperatives (SACCOs) operating in Thika town, Kenya.
1.1 Background to the Study
In Kenya, majority of citizens depends entirely on public means of transport from one
destination to the other. In low income countries, public transport systems are the major
provider of inner city mobility for the vast majority of the urban populations (Kamuhanda
& Schmidt, 2009).
Road transportation provides obvious benefits to countries and individuals. It facilitates
the movement of goods and people, creating employment, supporting economic growth,
enhancing access to education and health care, and connecting people to families and
entertainment. Data from low income countries consistently demonstrate that
communities living furthest from roads experience higher levels of poverty, lower levels
of school attendance and worse health outcome. Transportation is important in physical
and economic development of towns and cities all over the world. Property and land
values tend to increase in areas with expanding transportation networks, and increase less
rapidly in areas without such improvements. In the urban setting of most developing
countries, public transport is run by paratransit operators. According to Illes (2005)
paratransit operations are characterized by flexible fares, unscheduled operations and
semi fixed routes.
Paratransit comprises formally and informally operated minibuses, vans, taxis, station
wagons and in some cases informally operated buses. Interestingly, the significance of
transport sector towards achieving sustainable development and as a component of
sustainability has been stressed by scholars over the years. For instance, Illes, (2005), a
renowned transport analyst, emphasized that immobility perpetuates poverty. This
connotes that, transportation has resultant effects on almost every human being in the
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course of their daily activities. Thus, it is rare to conceive a situation over space where
transportation does not play a notable role in the life of any individual or society at large.
Sustainable transport system forms a basic foundation that facilitates movement of goods
and services in the present generation. Over the years, sustainable public transport has
been viewed as not just technical issues or questions, but as an inevitable need (Cervero
and Golub, 2007). This stemmed on the premise that, without adequate consideration of
social, economic and political conditions of public transport service, sustainable
development cannot be realized. In other words, sustainable transport cannot be said to be
achieved if it is not coupled with an effective and efficient programme that enhances
livelihood of people. There is need for improved transport infrastructural services as
components required achieving sustainable development to take care of incoming
generations. In other words, it should be affordable, efficient, available, safe, and
supports economic development.
In Nairobi, as well as in many cities in the developing world, rapid urbanization, high
operational costs, crumbling infrastructure, and weak institutions result in depleted public
transportation services and service voids (Beirao and Cabral, 2007). In Nairobi, the
paratransit industry is comprised of minibuses or Matatus. There is a movement occurring
in Sub-Saharan Africa, to reform these paratransit systems, most notably in the form of
Bus Rapid Transit (BRT). Countries such as Tanzania and South Africa are currently
looking to effectively operate BRT systems. BRT is an attractive option for cities of the
developing world as it is a flexible system that is more affordable than other mass transit
options. It also seeks to integrate various modes of existing transport systems, many
which are informal, into a larger formal system (World Bank, 2012).
According to the Ministry of Cooperative Development and Marketing, it is estimated
that there are around 25,000 Matatus operating in the country. In some areas like central
and Eastern provinces, the 14-seater has long kicked out the buses from the transport
business. After the government issued a legal notice requiring all the Matatus to join
SACCOs or limited liability companies by December 2010, over 1255 Matatu SACCOs
had been registered with the Ministry of Industrialization and Enterprise Development by
March 2014 (MOIED, 2014).
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Besides enlisting Matatu co-operatives in the improvement of road safety, law and order
and bringing sanity on our roads, the Matatu SACCOs are also tapping into the
economies of scale due to the co-operative business model to create wealth for its
members. Cooperatives are user-owned and user-benefited organizations. They could be
agricultural, non-agricultural, unions or Savings and Credit Cooperatives (SACCOs).
They operate in different sectors of the economy including agricultural, handicraft, Jua
Kali, transport, housing development, building and construction, consumer services,
banking and finance (Paul Gamba and Isaac Komo, 2010). In addition to the direct
benefits they provide to members, cooperatives strengthen the communities in which they
operate. According to Somavia (2002) cooperatives are specifically seen as significant
tools for the creation of decent jobs and for the mobilization of resources for income
generation. Many cooperatives provide jobs and pay local taxes because they operate in
specific geographical regions.
1.2 Statement of the Problem
Currently, public transportation is under-developed, and inefficient. Majority of Kenyan s
today use public transport as way of linking them from one destination to the other. In
Kenya, the rise of Matatu venture has been hindered by financial challenges, management
skills and political instability (Aligula et al., 2010). It is generally recognized that matatu
Saccos face unique challenges, which affect their growth and profitability in their
venture in Matatu business and hence, reduce their ability to contribute effectively to
sustainable development. Some of the notable challenges are: Lack of managerial training
and experience, inadequate education and business skills, lack of credit, unfavorable
national policy and regulatory environment, poor infrastructure and scanty markets
information. All these challenges lead to poor performance in Matatu business. This study
was carried out to investigate the factors influencing the performance of the formed
Matatu SACCOs operating in Thika town in Kenya.
1.3 Objectives of the Study
1.3.1 General Objective
The main purpose of the study was to investigate the factors that affect performance of
the Matatu SACCOs operating in Thika Town.
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1.3.2 Specific Objectives


i.

To find out the impact of management skills on the performance of Matatu SACCOs.

ii.

To find out the impact of business skills on the performance of Matatu SACCOs.

iii. To establish the impact of matatu industry government policy on the performance of
the Matatu SACCOs.
iv. To find out the impact of work environment on the performance of the Matatu
SACCOs.
1.4 Research Questions
i.

What is the impact of management skills on the performance of Matatu SACCOs?

ii. What is the impact of business skills on the performance of Matatu SACCOs?
iii. What is the impact of matatu industry government policy on the performance of
Matatu SACCOs?
iv. How does the work environment impact on performance of Matatu SACCOs?
1.5 Significance of the Study
The study will be of great significance to the various institutions since has established the
major challenges facing matatu Saccos. The study has highlighted a full description of
these factors, their causes and how they influence matatu business operations, this will
make it possible to pinpoint the crucial areas that need much attention when executing
matatu business, this will influence matatu Saccos to effectively implement appropriate
solution that will eliminate the most of challenges affecting matatu business.
The study will have a great impact towards creating foundation for development of
effective matatu business strategies which will help matatu Saccos in carrying out their
daily activities. Matatu Saccos will know how to handle the challenges facing them
therefore will lead to effective planning and running of the business. The study will also
be of great significance to the general public since it explains the pros and cons of matatu
business to the investors.
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The study will also be of great significance to various scholars, students and researchers
who might be involved in matatu Saccos research activities, the documented report of
this study will be easily acquired from the library and it will equip the learners with more
knowledge and skills on problems facing the matatu business. This will lead to
development of further research activities that will address other factors that will not be
addressed by this study and hence providing more effective solutions to effectively
handle matatu business challenges.
1.6 Limitations of the Study
There were difficulties in reaching out the target respondents due to their tight schedule
of work. The researcher contacted them and agreed on the time of administering the
questionnaire which was made through several follow-ups until the questionnaires were
administered to them.
The issue of confidentiality on the information sought from the respondents was a
challenge as they did not have confidence on the consumer of the information. The
researcher produced the copies of the research introduction letter from the Mount Kenya
University which gave the respondents confidence in giving out the information.
Cases of uncooperative respondents were experienced by the researcher and this affected
achievement of a high response rate. As a result, it led to a number of questionnaires not
being returned from some of the respondents who failed to voluntarily participate in
answering of the questionnaires. To this effect, researcher was forced to engage the
respondents in a brief interview to let them know the importance of this study as a
strategy to avoid lack of cooperation.
The individuals who were involved in answering the questionnaires answered the
questions based from their opinions but not from the existing facts in the organization.
This made some of the respondents to be biased. The researcher therefore employed
qualitative techniques to select and document, reliable and accurate findings.
1.7 Scope of the Study
The scope of this research was limited to the Matatu SACCOs which are registered in
Thika town and operating to and from Thika town. Thika is the largest town in Kimabu
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County. The study focused on five active Matatu SACCOs with a target population of
340 respondents and a sample size of 70 respondents.

CHAPTER TWO
2.0

LITERATURE REVIEW

2.1

Introduction

This chapter covers literature review on the factors affecting the performance of matatu
Saccos, as per the research objectives, critical review of the study, summary and gaps to
be filled and conceptual framework. This chapter considered literature relevant to the
subject under the study.
2.2

Review of the Related Literature

The literature review is in relation to the research objectives.


2.2.1. Matatus as Mode of Transport in Kenya
The fourteen- seater Matatus are individually owned and managed. However, some
owners are members of Savings and Credit Cooperative Societies (SACCOs) where they
save and borrow money and access transport routes commonly controlled by the
SACCOs (Graeff, 2009). Matatus have grown over the years since independence. They
began as an illegal transport entity. In 1973 a presidential decree allowed Matatus to carry
fare paying passengers without obtaining a Transport Licensing Board (TLB) licence.
Since then Matatu mode of public transport has grown over the years with the goal of
catering to the mobility demands of millions of Kenyans (Chitere, 2006). The travel
demands of both the low income and the middle income are met through this means of
transport.
According to the draft Sectional Paper on Integrated National Transport Policy (2010),
60% of the residents in Nairobi meet their daily travel needs by walking while 35% travel
by public transport (mostly Matatus and buses) and only 5% use private cars. Other
scholars have shown that approximately 49 % of the commuters in Nairobi make their
daily trips to destinations by the use of non-motorized transport, i.e. walking and use of
bicycles (Salon and Gulyani, 2008). Putting aside the difference in statistics of NMT
users, we see that a significant proportion of Nairobi residents rely on non-motorized
transport for their trips despite the growth in Matatu numbers over the years.
Matatu fall under the public service vehicles (PSV) here in Kenya. They operate in major
towns as well as in rural areas. As noted earlier Matatus are small scale transport that
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exists nearly all over the world. Situma (2007) looked at the origin of the Matatus and
their destinations, types of vehicles used, their capacities, roadworthiness, average
number of trips, ridership and the fare structure. The analysis based on the City Council
of Nairobi surveys of 1980 indicates that the Matatu mode of transport played an
important role in the public sector in Nairobi.
Barwells (2009) study examined financing and operating costs of materials and incomes
of Matatu owners. This study, like Situmas is silent on the working conditions of the
Matatu employees. Neither did the studies look at the serious problems of the
disorganization within the Matatu sector. The City Council of Nairobi (2000) reviewed
Matatus as a project component of the proposed Kenya Urban Transport Project. The
main intention of the scheme was to try to facilitate access to funds by the Matatu owners
to purchase new and second hand vehicles.
Coopers and Lybrand Association Ltd, Nairobi (2008) advanced a recommendation for a
standard Matatu for the entire country. Kapila et al (2002), in a study of the mode of
transport in Nairobi, analyzed in detail the economic and performance characteristics
with a view of contributing to the public transport policy and planning for Nairobis
population. It was established that in 1982 each Matatu in Nairobi created direct
employment for at least two persons at a cost of Kshs. 6,950 per year. It was further noted
that each Matatu also created two indirect jobs.
2.2.2. Matatu SACCOs as Small and Medium Enterprises (SMEs)
An enterprise is defined here as any income generating activity that is not in the primary
agriculture or mineral production (Gray, Cooley & Lutabingwa, 2007). In Kenya, the
classification of enterprises is primarily done by the number of employees engaged by
firms. Those firms that engage less than 10 employees are referred to as microenterprises, those that employ 10 to 49 workers are small-scale enterprises and 50-99
workers are referred to as the medium enterprises (Kenya Institute for Public Policy
Research and Analysis, 2009).
The Matatu SACCOs in this case fall under the Small and Medium Enterprises (SMEs).
A Matatu directly employs a driver and a conductor (Kyalo, 2006). Matatu SACCOs
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experiences the common causes of small business collapse such as lack of capital,
experience, poor market research, administrative incompetence, overestimation of market
demand and uneven cash flows (Bennet, 2006).
2.2.3. Management skills in the Matatu SACCOs
A major drawback in the growth and performance of the Matatu SACCOS is the lack of
the basic skills in the business management and entrepreneurship. Surveys of small
business failure maintain that entrepreneurs often have good ideas and are competent but
they do not have clue on how to run a business underlying appreciation of business
fundamentals (Barron, 2000). Cant et al (2009) points out that the identification of
business problems and development of the appropriate training programs to address these
problems which will assist in equipping small and medium enterprise owners with the
necessary managerial skills to survive in todays competitive world.
Ligthelm et al (2002) observed that the deficiencies in the internal environment are the
major cause of failures in small and medium enterprises and they revolve around among
others management skills. This problem comes from some specific management issues
such as lack of business management training and skills, inability to act as an
entrepreneur and limited family business culture. They finally point out that management
behavior and actions that are lacking; inability to set strategic goals, plan forward,
reluctance to seek advice, lack of management commitment and unwillingness to adapt
change.
According to Labie and Mersland (2011), corporate governance is a system or se t of
mechanisms by which an organization is directed and controlled in order to reach its
mission and objectives. SACCOs are usually characterized by multiple objectives and are
therefore different not only in their organizational forms but also in terms of products,
methodologies, social priorities and profit seeking behaviour (Mersland & Storm, 2009).
Corporate governance focuses on the board room but extends the scope to include owners
and others interested in the affairs of the company, including creditors, debt financiers,
analysts, auditors and corporate regulators' (Tricker, 2004).

Governance is about the use of power in an organization and it seeks to ensure leaders
governance to people. It also seeks to ensure that leaders act in the best interest of the
organization. It targets members who are the owners of the organization and seeks to
ensure that the power of an organization is used in a manner that facilitates independence,
responsibility, efficient, fairness, accountable, social responsibility, transparency,
efficiency and discipline (Murtishaw and Sathaye, 2006). Good Corporate Governance
entails effectiveness, competitiveness and sustainability of the society. It also ensures the
achievement of objectives, innovation, quality production/products, competitive edge and
credibility which would attract investments. It emphasizes the use of resources efficiently,
preservation of physical and social environment, sensitivity to societys needs and social
responsibility (Bosch, 2005).
According to Sacco Society Regulatory Authority (SASRA), Saccos should establish
appropriate policies in areas such as human resource, credit, investment, savings,
liquidity, risk management and establish audit committees to enhance internal controls.
They should also adopt international accounting and auditing standards. Saccos and are
supposed to appoint external auditors who have met the required standards as laid out in
Section 45 of the SASRA Act (2010). Disclosures of related transactions should be done
in the financial statements. Directors should not hold position in more than one Sacco
licensed under the Act. Sanctions for non-compliance with the law as opposed to
persuasive guidelines have also been introduced.
2.2.4. Business Skills in the Matatu SACCOs
The International Centre for Economic Growth (2001) states that most entrepreneurs start
a business because of reasons such as the availability of funds and opportunities then
embark to learn about it while operating it. This results in a steep learning curve and
higher chances of failure. Skills upgrading enable the informal sector to adopt new
technology which results to higher productivity. Naituli et al (2006), on the growth rate of
an enterprise, noted that it is significantly influenced by the education level of the
proprietor. Kanunga (2003) adds that although the need for business skills are recognized;
financial institutions, government and other institutions do not actively promote the skills
among the entrepreneurs
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Mochache (2005) observed the importance of training and how it enhances growth and
competitiveness of the SMEs. Training empowers owners and employers to make better
decisions and provide better quality goods and services. He further noted that the training
duration is influenced by the competency required for the particular trade. Managerial
skills are important in making decisions which are non-routine and strategic in nature.
Ligthelm et al (2002) states that financial management is a crucial field within the
environment of the small and medium enterprises thus present numerous potential
obstacles. Management competence is often determined by the availability of
management and financial information. McRae (2001) asserts that the potential of the
education system to contribute further to the growth of an entrepreneurship culture has
not been harnessed. The superior performance of high growth enterprises is partly
explained by the owners level of education and training. Entrepreneurial skills whether
formal or informal enable the owner of a business to seek growth and utilize
opportunities to make profit.
Namusonge (2008) noted that without requisite skills the goal of Kenya attaining
industrialization through SMEs will not be possible. The acquisition of the relevant
business skills is critical for their growth. He recommended for the formulation of a
comprehensive entrepreneurship development policy to nurture the entrepreneurs.
2.2.5. The Government Policy Governing Matatu SACCOs
Regulatory restrictions are one area in which business people and entrepreneurs need to
be facilitated in order that they become formal and grow. If regulations are friendly such
as registration process and tax rates are clear and affordable the small scale businesses
will openly operate and contribute to the economy more than at present (G.O.K Sessional
paper 1, 1996).

Chitere, et al (2004), established that institutional fragmentation in the Matatu sector was
a key obstacle to road transport planning. The Kenya Roads Board (KRB) is the main
institution responsible for the national road infrastructure network in Kenya. Other
institutions include, the Transport Licensing Board (TLB), Motor Vehicle Inspection
11

Unit, Registrar of Motor Vehicles, Driving Test Center, Traffic Police and Local
Authorities. These institutions are fragmented across ministries and departments. The
Registrar of Motor, Vehicles, who determines and fixes passenger and luggage capacity
for all vehicles, is currently under the Ministry of Finance, while the Driving Test Unit is
under the Office of the President.
The absence of a proper regulatory framework and the relaxing of the Michuki Rules
have also led the Matatu crews to practice collusion with the police (Kimani et al 2004).
Prior to the new government regulations, the PSV industry had been operating without
proper regulations and comprehensive policy to guide it. Various attempts by the
government to regulate the industry failed to make any serious impact. (IPAR, 2004).
The emerging policy concerns pertain to availability, profitability and affordability of
PSV transport (KIPPRA 2004). These policies are; Tax policy and how it impacts on
supply of more PSVs to meet the transport demand, business operations and financial
viability. Issues concerning the tax burden on PSV operators are at centre stage; Policies
relating to the cost of insurance and the extent to which PSV operators can afford;
Government policy on PSV vehicles importation i.e. minimum age and conditions and
costs of operation and how it affects the determination of fare; Long-term environmental
impact of importation of second hand vehicles when they become junk and PSV disposal
policy including issues of recycling; Sources of investment capital and its effect on the
number of PSVs on the road and profitability to the investor and Regulation of the
industry and the training of the drivers.
The new reforms and regulations in the public transport policy are expected to streamline
the operations in the industry for safety and comfort of passengers and increase
profitability in the business (Githinji, 2005). Despite the rapid growth and outstanding
contributions of the Matatu industry, the industry has faced many problems. Excessive
regulatory constraints inhibit business competitiveness worldwide. Africa is striving to
industrialize but often, government policies or their absence provoke immense costs and
adverse reactions by the entrepreneurs. Sometimes the policies or regulations are at fault
during the times of their implementation (Ikiara, 2001).
12

Ndungu, Kibua & Masinde (2004) observed that under the Kenyan law, it is mandatory
for any public service vehicle to have an insurance cover before it is allowed to operate.
There are two main types of insurance cover, namely; Third party policy and
comprehensive policy. The third party for 14 and 25 seater ranges between Kshs. 50,000
and Kshs. 100,000 plus 15% of the vehicle value (as at that time). The vehicles which
cannot afford the whole amount opt to pay monthly.
Most of the Matatus prefer third party policy because it is cheaper. According to Kamau
(2007), the government should involve the insurers in the process of fixing the premiums
to be charged. This is because pricing is a major factor in determining a companys as
well as the Matatus profitability. Proper pricing must take into consideration all the cost
elements in the business operations failure to which it will be very difficult for the
insurers and the Matatu enterprise to break even.
2.2.6. Working Environment in Matatu industry
Graeff (2009) noted that job security is a major concern especially for Matatu crews and
support staff. This concern stems from their casual employment status and verbal
employment contracts. Poor job security begets reckless driving and overcrowded
Matatus as drivers and conductors must meet the daily revenue marks or risk being fired.
Significantly, basic employment policy in Kenya does not cover Matatu workers.
Kalsi (2007) analyzed the terms and conditions of work in the Matatu industry in Kenya.
He discovered that Matatu employees work under different conditions. The workers are
generally on temporary basis and earn wages on daily basis. Chitere P.O.,et al (2004)
observed that 90% of the employees worked on contract/casual terms and had been with
their present employers for a few months, worked for long hours and did not belong to
any Matatu association.
2.3

Critical Review of the Literature

Ngatia, Fumihiko and Toshiyuki (2010) examined the structure of users satisfaction on
urban public transport service in developing country using the case of Nairobi. The study
investigated public transport service attributes that influenced overall passengers
satisfaction and ultimately enhancing public transportation ridership in developing
13

countries. The study developed Structural Equation Model (SEM) to elucidate the
interrelationship between the observed variables and unobserved variables and their
impact to the overall commuters satisfaction. Unobserved attributes such as Service
Quality (SQ), Safety (S) and Travel Cost (TC) were estimated. Level of satisfaction was
found to be significantly influenced by Service Quality (SQ), Safety (S), Travel Cost
(TC) and the perception on the systems performance.
Barwells (2009) study examined financing and operating costs of materials and incomes
of Matatu owners. This study, like Situmas is silent on the working conditions of the
Matatu employees. Neither did the studies look at the serious problems of the
disorganization within the Matatu sector. The City Council of Nairobi (1980) reviewed
Matatus as a project component of the proposed Kenya Urban Transport Project. The
main intention of the scheme was to try to facilitate access to funds by the Matatu owners
to purchase new and second hand vehicles.

Kyalo (2012) did an analysis of factors affecting performance of Matatu enterprises'


sector by using a case of selected routes in Nairobi. The study concluded that the
weaknesses in the Matatu sub-sector can be reduced by improving the management skills
of owners, lowering costs of operations, research, law enforcement and improving the
road transport infrastructure by the government. Young people need to be encouraged to
form partnerships to enable them purchase higher capacity PSVs which are more
profitable to operate. Matatu business has a chance of rapid growth if there is law and
order and if it is well supported by government and financial institutions that can give
loans at low interest rates.
Cox (2003) examined performance indicators in urban transport planning. Throughout the
world, increasing traffic congestion threatens economic growth. In many high-income
world urban areas, urban transport planning is based upon various principles that may be
generally characterized as seeking to encourage public transport use, walking and cycling
as an alternative to the automobile. Success, then, it could be said should be measured by

14

the extent to which public transport, walking and cycling market shares increase, while
automobile market shares decline.
Eboli and Mazzulla (2012) examined performance indicators for an objective measure of
public transport service quality. The measurement of transit performance represents a
very useful tool for ensuring continuous increase of the quality of the delivered transit
services, and for allocating resources among competing transit agencies. Transit service
quality can be evaluated by subjective measures based on passengers perceptions, and
objective measures represented by disaggregate performance measures expressed as
numerical values, which must be compared with fixed standards or past performances.
The research work dealt with service quality evaluation based on objective measures;
specifically, an extensive overview and an interpretative review of the objective
indicators until investigated by researchers are proposed. The final aim of the work was
to give a review as comprehensive as possible of the objective indicators, and to provide
some suggestions for the selection of the most appropriate indicators for evaluating a
transit service aspect.
Situma (2007) looked at the origin of the Matatus and their destinations, types of vehicles
used, their capacities, roadworthiness, average number of trips, ridership and the fare
structure. The analysis based on the City Council of Nairobi surveys of 1980 indicates
that the Matatu mode of transport played an important role in the public sector in Nairobi.
Coopers and Lybrand Association Ltd, Nairobi (1980) advanced a recommendation for a
standard Matatu for the entire country. Kapila et al (1982), in a study of the mode of
transport in Nairobi, analyzed in detail the economic and performance characteristics
with a view of contributing to the public transport policy and planning for Nairobis
population. It was established that in 1982 each Matatu in Nairobi created direct
employment for at least two persons at a cost of Kshs. 6,950 per year. It was further noted
that each Matatu also created two indirect jobs.
Niyonsenga (2012) studied public transport supply for Kigali, Rwanda. Public transport
is supplied to provide mobility to people who do not have access to private, or provide an
15

alternative option to private car mobility. Public transport is increasingly adopted for
many purposes, such as providing mass mobility, managing traffic congestion, mitigating
air pollution, reducing energy consumption and creating development opportunities. The
results indicated that, the prevailing public transport in Kigali could serve up to 65% of
the potential demand, regardless of the distance required to reach the bus stop. 37% of the
demand was adequately served, in case both spatial and temporary aspects of service
were considered. This low service performance was due to the deficiencies of public
transport route network and the service capacity constraints.
2.4

Summary and Gaps to be Filled by the Study

Literature review looked at the studies as conducted by other scholars in as far as


organizational performance is concerned. Not much has been done on the factors
influencing the performance of Matatu SACCOs operating in Thika town even though the
research has been carried in other places. From the literature review, the study established
that several scholars had reviewed the concepts of factors affecting performance of
matatu saccos. For example, Ngatia, Fumihiko and Toshiyuki (2010) examined the
structure of users satisfaction on urban public transport service in developing country
using the case of Nairobi. Dziekan (2008) studied ease-of-use in public transportation a
user perspective on information and orientation aspects. Cinquina (2008) did a study on
the Sustainable public urban transport systems using the case of Curitiba. Mccormick,
Mitullah, Chitere, Orero and Ommeh (2012) reviewed paratransit operations and
regulation in Nairobi matatu business strategies and the regulatory regime. Kyalo (2012)
did an analysis of factors affecting performance of matatu enterprises' sector by using a
case of selected routes in Nairobi. There is no known study that has specifically studied
the factors affecting financial performance of public transport business in Kenya. The
study therefore intends to fill these gaps.
2.5

Conceptual Framework

A conceptual framework is a graphical or diagrammatic representation of the relationship


between variables in a study (Borg, Gall & Gall, 2005). It helps the researcher to see the
proposed relationship between the variables easily and quickly. This section provides an
exploration framework concerning variable inter-relationships that explains the factors
16

affecting performance of matatu Saccos. The study explored the relationship between
business management & entrepreneurial skills in the Matatu SACCOs, the policy
framework governing the Matatu SACCOs, working conditions for the Matatu operators
in Kenya and Matatu SACCOs security issues and the performance of the Matatu
SACCOs.

The conceptual framework provides the explanation concerning the relationship between
independent and dependent variables.
Independent Variable

Dependent Variable

Management skills

17

Business skills

Performance of the Matatu


SACCOs

The government policy


governing Matatu
Industry

Working environment for the


Matatu Industry

Figure 2.1: The Conceptual Framework


Source: Research Data 2015

2.5.1 Management skills in the Matatu SACCOs


A major drawback in the growth and performance of the Matatu SACCOS is the lack of
the basic skills in the business management. Surveys of small business failure maintain
that entrepreneurs often have good ideas and are competent but they do not have clue on
how to run a business underlying appreciation of business fundamentals. There is need
for identification of business problems and development of the appropriate training
programs to address these problems which will assist in equipping small and medium
enterprise owners with the necessary managerial skills to survive in todays competitive
world.
18

2.5.2 Business Skills in the Matatu SACCOs


For every business to have high productivity there is need for the operators to have the
required business skills through training and business experience. Training empowers
owners and employers to make better decisions and provide better quality goods and
services. The training duration is influenced by the competency required for the particular
trade. Business skills are important in making decisions which are non-routine and
strategic in nature. The superior performance of high growth enterprises is partly
explained by the owners level of education and training. Business skills whether formal
or informal enable the owner of a business to seek growth and utilize opportunities to
make profit. The acquisition of the relevant business skills is critical for their growth.
There is need for the government and all matatu Saccos to join hands and formulate
comprehensive entrepreneurship development policy to nurture the matatu industry
entrepreneurs.
2.5.3 Policy Framework Governing Matatu SACCOs
For matatu industry to be viable to the investors there is need to have a clear and effective
policy framework to govern the operation of the industry. The government is working
closely with other sector and institutions related to the transport industry which include;
National Transport Services Authority (NTSA), The Kenya Roads Board (KRB) is the
main institution responsible for the national road infrastructure network in Kenya. Other
institutions include, the Transport Licensing Board (TLB), Motor Vehicle Inspection
Unit, Registrar of Motor Vehicles, Driving Test Center, Traffic Police and Local
Authorities. These institutions are fragmented across ministries and departments. The
Registrar of Motor, Vehicles, who determines and fixes passenger and luggage capacity
for all vehicles, is currently under the Ministry of Finance, while the Driving Test Unit is
under the Office of the President.
2.5.4 Working environment for the Matatu business in Kenya
Poor working conditions can result to accidents and faulty transport services. When the
employees and employers of the matatu industry operators agree on better working
conditions, productivity will automatically improve and the issue of remuneration and
working for long hours will be looked at positively.
19

2.5.5 Performance of Matatu Saccos


With proper management of matatu Saccos and good government regulations will enable
the Matatu industry be able to compete with other revenue generating sectors in Kenya. It
is paramount to allow conducive business environment for the Matatu sector so as to
ensure that the investors get good returns. Surveys of small business failure maintain that
entrepreneurs often have good ideas and are competent but they do not have clue on how
to run a business underlying appreciation of business fundamentals (Barron, 2000).

20

CHAPTER THREE
3.0
3.1

RESEARCH DESIGN AND METHODOLOGY

Introduction

This chapter outlines the methodology that was used in gathering data on the factors that
affect performance of matatu Saccos with respect to matatu Saccos in Thika Town. The
research design and methodology used was well defined and the reason as to why they
are chosen in the study was elaborated in the course of the study. The research design
was incorporate important aspects of methodology that will include study design, target
population, sample design, data collection methods and data analysis methods. This was
accurately and effectively done to ensure desirable results.
3.2

Research Design

The research design used for the study was descriptive survey. This is because it focuses
on the large population and it gives explanation on the state of affairs as they exists at
present (Kothari, 2004). Mugenda and Mugenda (2009) define a descriptive survey as a
method which enables the researcher to summarize and organize data in an effective and
meaningful way. The descriptive method was adopted since it helped to collect data from
the population and to get the description of existing phenomena by asking individuals
about their perceptions, attitudes, behaviors or values. The design also allowed the
researcher to generate both numerical and descriptive data that were used in measuring
correlation coefficient between the variables.
3.3

The Target Population

Target population is defined as universal set of the study of all members of real or
hypothetical set of people, events or subjects to which an investigator wishes to generate
this result (Mugenda and Mugenda, 2003).

The target population of this study was

made up of Matatu SACCOs registered by the Ministry of Industrialization and


Enterprise Development in Thika Town. The total number of registered Matatu SACCOs
in Thika town is 10. Out of these SACCOs, five Matatu SACCOs are very active while
the other five are not very active. The study focused on the five active Matatu SACCOs
with a total membership of 300 and 20 permanent employees at the management level.
21

The Matatu SACCOs also have casual employees i.e. drivers and conductors. The study
included 2 drivers and 2 conductors from each SACCO, which made the total population
size to be 340.
3.4

Sampling Design and Sample Size

A sample comprising of members/owners, management level employees and the casual


employees (drivers and conductors) of the six Matatu SACCOs was considered for this
study. Stratified random sampling with non-proportionate allocation of sample sizes was
used to draw samples from the target population. The population was divided into 4
subgroups/ strata of members/owners of the SACCOs, management level employees,
drivers and conductors. Each stratum had members disproportionate to the respective
numbers in the target population.
Saunders, Lewis & Thornhill (2009) argue that a sample 10% to 20% of accessible
population is acceptable in a descriptive research. For this study, the researcher used 10%
of the accessible population in the selected Matatu SACCOs. The researcher used simple
random sampling to select 2 drivers and 2 conductors from each SACCO to be included
in the study. Since the number of management were key in decision making and to this
study the researcher decided to use all management of five SACCO to be used in this
study.
Table 3.2: Sample Size
Strata/Group

Population

Sample Size

Members/ Owners

300

30

Management Employees

20

20

Drivers

10

10

Conductors

10

10

Total

340

70

Source: Research Data 2014


3.5

Data Collection Methods

Data collection methods are those employed in getting the information from the units
under investigation. Data collection method which was used to collect the relevant data
22

was questionnaires. Questionnaires were designed in a simple form which were easily
understood and were delivered to the respondents who participated in the research study.
A specific time frame was given to the respondents to fill the questionnaire.
Questionnaires were used to provide the major sources of data. This is because
questionnaires are always economical and time saving and free minded responses are
encouraged. Questionnaires were designed and given to respondents so that they can fill
at their own convenient time. The questions were closed ended. Open ended questions
were availed and space left for filling in the relevant explanations.

This gave an

opportunity to the respondents to clearly state and elaborate their views accordingly.
According to (Mugenda and Mugenda, 2003) validity is the accuracy and meaningfulness
of inferences, which is based on the research results. It is a degree to which results
obtained from the analysis of the data actually represents the phenomenon under study.
The questionnaires were also subjected to scrutiny by researcher's supervisor and other
research experts' for validation purposes and it was found to be valid.
Reliability refers to the consistency of a measure, the ability of the instrument used in
research to consistently measure the characteristics of interest over time (Ahmed et al,
2004). According to Mugenda and Mugenda, (2003) reliability is a measure of the degree
to which a research instrument yields consistent results or data after repeated trials. To
ensure reliability of the instrument, a pilot study was carried out.
The instruments were pre-tested through a pilot study before the actual data collection to
enhance reliability. The research instruments were tested to identify possible problems
during the main study and clarify on the instrument and appropriateness of the language.
The importance of pre-testing a questionnaire according to Creswel (2009) is to help the
researcher understand the meaning of the questions to be respondents and how they arrive
at their response. The questionnaires were distributed to 10 respondents from matatu
operators who were not the part of the study. A specific time frame of five days was
given to the respondents to complete the questionnaire. The questionnaires were
distributed to individual persons in the categories.

23

3.6

Data Analysis Methods

According to Kombo and Tromp (2011), data analysis procedure includes the process of
packaging the collected information putting in order and structuring its main components
in a way that the findings can be easily and effectively communicated. The questionnaires
were carefully checked to ensure that responses were correctly ascertained. The data was
finally analyzed quantitatively using Microsoft excel.

This involved the use of

descriptive statistics (mean, frequencies and percentages) analysis method to ensure


accuracy. The frequency tables, charts and figures were used to present the results for
easier understanding and interpretation.

24

CHAPTER FOUR
4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION
4.1 Introduction
The chapter deals with analysis, presentation and interpretation of the study which was to
investigate the factors that influence the performance of the Matatu SACCOs operating in
Thika Town. The analysis was done based on the research objectives.
4.2 Presentation of Findings
This section represents the findings of the study as per the research objectives.
4.2.1

Response Rate

Of the 30 owners/members targeted for the study, 20 responded to the questionnaire


representing 67% response rate. There was a 100% response rate from the management
level employees, drivers and conductors. Thus a total of 60 respondents out of the drawn
sample of 70 responded to the questionnaires representing 86 % participation level as
shown in the table 4.1. This response rate was considered sufficient for the purposes of
the study. This response rate was favorable according to Mugenda and Mugenda (2003)
in which they assert that a 50% response rate is adequate, 60% good and above 70% rated
very well. Further, Nordin (2009) in his study on consumers attitude towards counterfeit
products in Malaysia stated that, a response rate of above 70% is adequate for satisfactory
research findings.

Table 4.1: Response Rate

Category

Response

Percentage

Owners/Members

20

67%

Management Employees

20

100%

Drivers

10

100%

Conductors

10

100%

Total

60

86%

Source: Research Data 2014


The above information form the basis of the research findings, analysis, interpretations,
conclusions and recommendations contained in the study.
4.2.2

Demographic Characteristics of the Respondents

The study examined the demographic characteristics of the owners/members,


management level employees, drivers and conductors in the Matatu SACCOs through the
following aspects: gender, age, level of education as well as the number of years in the
Matatu SACCO as indicated in this section:

Figure 4.1: Gender of the Respondents


Source: Research Data 2014

Figure 4.1 indicated that majority of the respondents (85%) were male while only 15% of
the respondents were female.
Table 4.2: Age of the Respondents
Position held in
the SACCO

Age of the Respondents


18-25

26-30

31-40

Total

Conductors

30%

40%

30%

10

100%

Drivers

20%

30%

50%

10

100%

Management
Employees

10%

30%

12

60%

20

100%

Owners/Members

5%

15%

16

80%

20

100%

Total

13%

16

27%

36

60%

60

100%

Source: Research Data 2014


According to table 4.2, majority of the respondents (60%) were of age bracket 31-40
followed by those in age bracket of 26-30 at 27% while respondents at age bracket of 1825 were the least at 13%.

Table 4.3: Level of Education

Position held in

Level of Education

the SACCO
College/University Primary

Secondary Total

Conductors

10%

90%

10 100%

Drivers

30%

20% 5

50%

10 100%

Management
Employees

12

60%

40%

20 100%

Owners/Members

13

65%

35%

20 100%

Total

29

48%

4%

29

48% 60 100%

Source: Research Data 2014


Results in table 4.3 shows education level of respondents within the study. According to
the results, majority of the respondents (48%) were both college/university graduates and
secondary school education graduates while 4% of the respondents had completed
primary school education.

Table 4.4: Number of years in the SACCO

Position held in

Duration of Service in the SACCO

the SACCO
1-3

4-6

7-9

Total

Conductors

50%

50%

10

100%

Drivers

30%

20%

50%

10

100%

Management Employees 12

60%

20%

20%

20

100%

Owners/Members

40%

35%

25%

20

100%

Total

28

47%

18

30%

14

23% 60

100%

Source: Research Data 214


Results in table 4.4 shows that majority of the respondents (47%) have been in their
respective SACCOs for a period of 1-3 years. Majority being the owners (40%),
management level employees (60%), conductors 50% and drivers (30%) have been in
their respective Matatu SACCOs for a period of between 1-3 years. Majority of the
drivers (50%) have been in their SACCOs for the period of 7-9 years while 35% of the
owners have been in the Sacco for a period of 4-6 years.

4.4 Effects of the Level of Management and Business Skills on the Performance of
Matatu SACCOS

Table 4.5 Level of management and business skills


Activity

Always Sometimes Hardly


1
2
3

Never
4

Respondents

Do you keep books of 70


account?

20

10

0.0

100

Do
you
properly 60
determine your profits?

40

0.0

0.0

100

Do you
profits?

save

your 67

30

0.0

100

Do you train
employees?

your 20

45

25

10

100

Do you operate a bank 90


account?

100

Do you attend seminars 5


and workshops?

28

60

100

Do
you
inspect 45
employees
as
they
work?

40

10

100

Do you conduct market 5


research?

32

60

100

Source: Research Data 2014


Table 4.5 shows that 70% of the Matatu SACCO owners/members indicated that they
keep books of accounts for their business, 60% determined their profits properly and 90%
operated bank accounts. 67% of the Matatu SACCO owners save their profits regularly.
Only 20% of the owners/members train their employees regularly, 5% of the owners
usually attend seminars and workshops and 45% of the owners always inspect their
employees as they work. The study also revealed that only 5% of the owners conduct
market research for their business.

4.5 Effects of the Government Policy Framework towards the Performance of the
Matatu SACCOs

Figure 4.2: Are the government policies good enough to promote performance of the
Matatu SACCOs?
Source: Research Data 2014
From figure 4.2, majority of the respondents (85%) stated that the government policies
are good enough to promote growth and performance of their Matatu SACCOs whereas
15% were of the opinion that government policies are not good enough to promote the
growth and performance of their Matatu SACCOs.

Table 4.6 Benefits of the government policies towards the performance of the
Matatu SACCOs
Response

Frequency

Percentage (%)

Promotes discipline among drivers and conductors 30

50%

Reduces road accidents

15

25%

Leads to smooth process of SACCO registration

12%

Improves the security of the Matatus

5%

Proper maintenance of the vehicles

8%

Total

60

100

Source: Research Data 2014


The table 4.6 indicates that majority of the respondents (50%) were of the opinion that
government policies are good stated that government policies have promoted discipline
among the drivers and conductors, a significant number of the respondents 25% pointed
out that government policy help in reducing road accidents while 12% of the respondents
indicated that government policies has led to smooth process of Sacco registration.

Table 4.7: Constraints brought about by the government policies towards the
performance of the Matatu SACCOs
Response

Frequency

Percentage %

40

67%

Increases the rate of corruption among the


traffic police

Lengthy process of Matatu SACCO


registration

15

25%

PSV are very expensive

8%

Total

60

100

Source: Research data 2014


Out of the respondents who felt that government policies are not good enough to promote
the performance of the Matatu SACCOs, 67% stated that the government policies
increases the rate of corruption among the traffic police, 25% of the respondents
indicated that it lengthens he process of registering matatu Sacco while 5% of the
respondents indicated that PSV licenses are very expensive. The results are as shown in
table 4.7.

Figure 4.3: Are the insurance policies good enough to promote performance of the
Matatu SACCOS?
Source: Research Data 2014

From the figure 4.5, 85% of the respondents stated that insurance policies are good
enough to promote SACCO growth and performance while only 15% of the respondents
thought otherwise.
Table 4.8: Benefits of the insurance policies to the Matatu SACCOs
Response

Frequency Percent %

Compensation in case of accident

42

70%

Insurance companies offer training facilities

13%

Promote discipline among the drivers and conductors 3

5%

Promotes business confidence

12%

Total

60

100

Source: Research Data 2014


From table 4.10, majority of the respondents (70%) stated that insurances companies
compensate the Matatu SACCOs in case of accident, 13% of the respondents indicated
that they offer training facilities, 12% of the respondents indicated that they promote
business confidence while 5% of the respondents indicated that, they promote discipline
among drivers and conductors.
4.6 Effects of Working Conditions for the Matatu Operators to the Performance of
the Matatu SACCOs
Table 4.11 indicates that majority of the employees (80%) are employed temporarily. All
conductors, 60% of the drivers and 5% of the management level employees are employed
temporarily. Only 65% of the employees are employed on permanent basis.
Table 4.11: Terms of employment
Position Held in the SAACO

Terms of Employment
Contract
%

Permanent
%

Temporary
%

Conductors

100

Drivers

40

60

Management employees

25

70

Total

25

65

80

Source: Research Data 2014

Table 4.12: Mode of wage payment


Wage payment (Kshs)

Frequency

Percentage %

Daily

16

80%

Fortnightly

20%

Weekly

Total

20

100

Source: Research Data 2014


Table 4.12 clearly shows that majority of the respondents (80%) are paid their wages on
daily basis while the rest 20% get their pay on fortnightly basis.
Table 4.13: Average daily earnings
Daily earnings

Frequency

Percentage %

301-400

10%

401-500

35%

501-600

11

55%

Total

20

100

Source: Research Data 2014


From table 4.13, majority of the respondents (55%) revceive more than Kshs 500 as daily
wages while 10% of the employees get an average daily earning of above Kshs.400. Only
35% of the employees get an average daily earning of between Kshs.301-400.
Table 4.14: Number of working hours in a day
Working Hours

Frequency

Percentage %

6-8

10%

9-11

16

80%

12-14

10%

Total

20

100%

Source: Research Data 2014


Table 4.14 shows that majority of the respondents (80%) in the Matatu SACCOs work
between 9-11 hours a day, while 2% of the respondents indicated that they work between
6-8 hours per day and 12-14 hours a day.
Table 4.15: Are you offered any of the following allowances?

Type of Allowance

Frequency

Percentage %

Breakfast allowance

10

50%

Leave allowance

House allowance

Health allowance

Lunch allowance

10

50%

Total

20

100%

Source: Research Data 2014


As indicated in table 4.15 that 50% of the respondents indicated that Matatu well as
breakfast allowance. It was evidenced from the study other allowances were hardly
offered to the employees.
4.7 Effects of Matatu SACCOs Security Issues to their Performance

Figure 4.4: Presence of Route Cartels


Source: Research Data 2014

Figure 4.4 indicates that 85% of the respondents did not acknowledge the presence of
route cartels controlling the route on day to day basis while 15% indicate that they are
aware of the cartels.

Figure 4.5: Are there security arrangements for your Matatu SACCO?
Source: Research Data 2014
Figure 4.5 shows that 70% of the Matatu SACCOs engage in extra security measures to
ensure safety of their vehicles as well as that of their customers whereas 30% do not
engage in extra security measures for their Matatu SACCOs.
Table 4.16: Security arrangements for the SACCO
Response

Frequency

Percentage %

Arranging for road blocks with the traffic police 15

75

Employing security guards and checks

25

Total

20

100

Source: Research Data 2014


As shown in the table 4.16, the results indicates that, majority of the respondents (75%),
indicated that arranging of road blocks by traffic police as the main security arrangements
for the matatu Saccos while 25% of the respondents felt that, employing security guards
and checks as the appropriate security measures for matatu Saccos.
Table 4.17: Other security challenges encountered by the Matatu SACCOS
Response

Frequency

Percentage %

Vandalism of the vehicles by

15

25

Carjacking and robbery

25

42

None

20

33

Total

60

100

thieves at night

Source: Research Data 2014


As per the results from table 4.17, 25% of the respondents encountered vandalism of the
vehicles by thieves at night, 42% encountered carjacking and robbery while 33% did not
encounter any security challenge in the course of doing their business.

4.8 Priority Problems and Constraints Affecting the Matatu SACCOS

Figure 4.6: Performance of the Matatu SACCOs in terms of income generation


Source: Research Data 2014
The results in figure 4.6 shows that 60% of the respondents stated that the performance of
their SACCOs in terms of income generation as excellent, 20% as good while 12% of the
respondents indicated that performance of matatu Saccos in term s of income generation
is average while only 8% of the respondents who indicated is poor.

Table 4.18: Causes of low performance by the Matatu SACCOs


Problems/ Constraints

Priority Priority Priority Priority Respondents


1
2
3
4
%
%

Lack of managerial and 70


entrepreneurial skills

20

100

Inadequate
policies

government 30

45

10

15

100

Poor working conditions 52


for the employees

40

100

Poor insurance policies

38

26

24

12

100

and 56

24

15

100

Insecurity,
Cartels

Crime

Source: Research Data 2014


The results in table 4.18, indicates that 70% of the respondents were of the view that lack
of managerial and business skills led to low performance of their Matatu SACCOs, 56%
indicated that insecurity, crime and cartels were the major contributors to low
performance of matatu Saccos. In addition, 52% of the respondents complained of poor
working conditions of the employees as the cause of low performance in the Matatu
SACCOs while 30% of the respondents felt that inadequate government policies were the
cause of low performance in the Matatu SACCOs.
4.9 Strategies that may improve the Performance of the Matatu SACCOs
Table 4.19 indicates that, 60% of the respondents felt that employees of the Matatu
SACCOs should be trained on the business and management skills while 60% of the
respondents felt that the working condition of the SACCO employees should be
improved. In addition, 55% of the respondents were of the view that security must be
improved in order for the Matatu SACCOs for growth and profitability to be realized.

Only 35% of the respondents were of the opinion that government policies in the Matatu
sector need to be reviewed.
Table 4.19: Ways of improving Matatu SACCOs performance
Solutions

Priority Priority Priority Priority Respondents


1

Train the employees on 60


managerial and business
skills

15

20

100

Review
government 35
policies on the Matatu
sector

20

15

30

100

Improve the working 60


conditions
for
the
employees

30

100

Improve security/ Ban 55


Matatu Cartels

20

10

15

100

Source: Research Data 2014


4.3 Conclusions
The findings concluded that there is direct relationship between the independent variables
and the dependent variable. It can be concluded that business management and
entrepreneurial skills have impact on the performance of the Matatu SACCOs. Proper
maintenance of books of accounts, training of the employees on management and
entrepreneurial skills, attending workshops and seminars and inspection of employees as
they work should be encouraged always so that Matatu SACCOs can be able to achieve
high levels of profitability. Insurance policies are good as far as profitability of the
Matatu SACCOs is concerned. Other government policies towards the Matatu business
are good; however road safety rules and regulations need to be enforced in order to
reduce corruption among the traffic police and increase efficiency in this sector. Poor
working conditions impact on the profitability of the Matatu SACCOs. Most of the

employees works for more than 8 hours in a day, majority of the employees are also
employed on temporary basis and no other allowances are given to the employees apart
from breakfast and lunch allowances. Poor working conditions were indicated as a major
contributor to low productivity and hence low income generations.

CHAPTER FIVE
5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter discusses the summary of findings, conclusions and recommendations of the
research study. The summary of findings gives an in-depth explanation of the major
factors raised by the respondents on the factors influencing the performance of Matatu
SACCOs operating in Thika town. This was based on the analyzed facts in quantitative
analysis where numerical values were used to explain the effects of independent variables
on dependent variables. The findings contributed towards answering of the research
questions and making conclusions of the research study. The study gave several
recommendations and suggestions for further studies to address.
5.2 Summary of the Major Findings
The study examined the demographic information in regards to matatu owners/members,
management level employees, drivers and conductors in the Matatu SACCOs which
included gender, age and level of education as well as the number of years in their Matatu
SACCOs. According to the data presented, majority of the respondents (85%) in the
Matatu SACCOs are males compared to 15% representing the females. In the past,
matatu industry was seen as a man affair business only and you could easily see a lady a
conductor of driver and even women investing in matatu industry. The results shows that,
with time things are changing and as men used to dominate and do well in matatu sector
women too can do better. The streamlining done in matatu sector I terms of governing
them through Saccos has brought sanity in the industry and therefore bring confidence
within the investors as well as prospective investors.
Majority of the respondents (48%) were both college/university graduates and secondary
school education graduates while 4% of the respondents had completed primary school
education. majority of the respondents (60%) were of age bracket 31-40 followed by
those in age bracket of 26-30 at 27% while respondents at age bracket of 18-25 were the
least at 13%. This means that, there is significant of educated investors and operators of
matatu business sector which may lead to efficient and effective running of the business.
Education is key in decision making and this will enable the investors to make informed

decision pertaining to the business and also contribute to any ideas which may promote
the sector. Operators among youth bracket are well represented and this means that we
have energetic people who can work with a lot of zeal and become more productive.
Majority of the respondents (47%) have been in their respective SACCOs for a period of
1-3 years. Majority being the owners (40%), management level employees (60%),
conductors 50% and drivers (30%) have been in their respective Matatu SACCOs for a
period of between 1-3 years. Majority of the drivers (50%) have been in their SACCOs
for the period of 7-9 years while 35% of the owners have been in the Sacco for a period
of 4-6 years. Having worked for long period in the sector means that you have a lot of
experience and knowledge in running the business. Having 35% of the respondents
worked for 7-9 years means that the industry is being operated by experienced people
hence there is likelihood of tremendous growth.
5.2

Response to the Research Questions

5.2.1

Management skills in Matatu Sacco

Majority of the owners (40%), management level employees (60%) and conductors
(50%) have been in their respective Matatu SACCOs for a period of between 1-3 years.
Half of the drivers (50%) have been in their SACCOs for the same period of 1-3 years.
The study therefore assumes that since the registration of the SACCOs commenced in the
start of the year 2011, most of the respondents have not moved from one SACCO to the
other. This can be attributed to the clear vision and sanity in the business brought about
by the radical changes in the Matatu sector.
5.2.2

Business Skills in Matatu SACCO

According to the data presented, majority of the respondents (70%) reported lack of
business skills as the main cause of low performance by their Matatu SACCOs. It was
evidenced that most of the Matatu SACCOs do not train their employees on managerial
and entrepreneurial skills on regular basis, owners of the Matatu SACCOs rarely attend
seminars and workshops and they also rarely conduct market research.
5.2.3

Policy Framework Governing Matatu SACCO

The study found out that majority of the respondents (85%) was of the opinion that
government policies are good enough to promote the performance of the Matatu
SACCOs. 85% of the respondents stated that insurance policies are good enough to
promote SACCO performance while only 15% of the respondents were of the contrary
opinion. However, out of the respondents who felt that government policies are not good
enough to promote the performance of the Matatu SACCOs, 67% stated that the
government policies on road safety increases the rate of corruption among the traffic
police.
5.2.4

Working Environment for Matatu Operators

The data presented indicated that 60% of the respondents complained that poor working
conditions of the Matatu SACCO employees as the cause of low performance in the
Matatu SACCOs. It is also noted that only 65% of the employees are employed on
permanent basis, 90% of the employees in the Matatu SACCOs work beyond the
standard 8 hours in a day and only lunch and breakfast allowances are offered to the
employees.
5.3 Conclusions
The study concludes that; Proper maintenance of finances, training of the employees on
management and business skills, attending workshops and seminars and inspection of
employees as they work should be encouraged always so that Matatu SACCOs can be
able to achieve high levels of profitability. The researcher therefore, based on these
findings concludes that managers should have a clean and high quality track record to
help the SMEs access finance more easily to achieve the set goals.
The SMEs need to have management skills with high business planning skills which are
expected to have easier access to finance compared to those with poor business planning
skills. Management of Matatu business by highly academically qualified personnel is
deemed to be more efficient, and as such, facilitates their access to finance more easily
due to the fact that providers of funds are more likely to have more confidence in those
with high academic qualifications than those with low qualification levels.

The study therefore concludes that Matatu business owners and their employees should
be trained on management of their venture because it improves growth and knowledge.
Some of the aspects of training programme evaluation form for the trainees were the
relevance of course to the needs of the trainees, the course objectives, and course content.
The study also concludes that the impact of training on the venture is measured or
evaluated through reduction in grievances, through the reduction of turnover and through
increase in revenue.
The study further concludes that policy makers impact the business both positively and
negatively. The study concludes that the SACCOs, the traffic police, county council and
the ministry of transport impact the venture positively and negatively. Matatu Saccos are
important bodies in the transport sector. Therefore both formal and informal institutions
have been found to affect matatu business operations. The formal institutions generally
come in the form of public and government institutions set up to regulate the performance
of the matatu sector. They come in the form of government ministries, departments and
regulatory authorities. The government has set in place some formal regulatory bodies for
both the roads and the users of the roads.
From the research objectives, it can be concluded that business management and
entrepreneurial skills have impact on the performance of the Matatu SACCOs. Proper
maintenance of books of accounts, training of the employees on management and
entrepreneurial skills, attending workshops and seminars and inspection of employees as
they work should be encouraged always so that Matatu SACCOs can be able to achieve
high levels of profitability.
Secondly, it can be concluded that insurance policies are good as far as profitability of the
Matatu SACCOs is concerned. Other government policies towards the Matatu business
are good; however road safety rules and regulations need to be enforced in order to
reduce corruption among the traffic police and increase efficiency in this sector. Thirdly,
poor working conditions impact on the profitability of the Matatu SACCOs. Most of the
employees work for more than 8 hours in a day, only 3% of the employees are employed
on permanent basis and only 7.1% of the Matatu SACCO employees are given health

allowance and house allowance. Most of the employees are not motivated due to these
poor working conditions and hence it leads to low productivity.
5.4 Recommendations
Given the above findings and conclusions, the researcher recommends the following
measures for implementation with regard to the performance of the Matatu SACCOs:
Matatu sector operators should organize for training, for both the owners of the Matatus
and their employees so that they can improve on their management and business skills.
The owners of the Matatu business are also recommended to do routine inspections of
their employees as they carry out their work.
Government policies are good as far as the performance of the Matatu business is
concerned; however the policies on road safety have resulted in massive corruption
among the traffic police officers. Corruption reduces the levels of profitability in the
Matatu business. The government is therefore required to come up with ways of dealing
with the corrupt police officers. Collaboration and participation is a subset of SACCOs.
Poor working conditions lead to low productivity of the employees which in turn make
the Matatu SACCOs to record low profits. It is recommended that Matatu SACCOs
should improve the working conditions of their employees so as to register huge profits.
Engagement in extra security measures by the Matatu SACCOs increases their operation
costs. The study recommends that the government increases road patrols so as to reduce
incidences of carjacking and robbery.
There must be collaboration and participation of each and every matatu owner in order to
draw the much needed synergy that will enable them maximize on profits. To attain a
higher stability and efficiency, the matatu owner managers must ensure that the resources
they have are prudently used and proper records kept. Monitoring and evaluation of every
activity in the business must be continuously done so as to detect weakness early and take
the corrective action.
The study recommends that in order to improve their earnings, owners have to properly
manage their relationships with the individuals contracted to run their matatu business.
Saccos need to come up with strategies that will lead to better management of Saccos to

allow for set of rules that can have positive effect on the matatu businesses and also
training seminars for the matatu operatives so as to improve the overall performance of
the matatu businesses. Taxes and levies imposed/effected by TLB need to be aligned to
the effect they have on the performance of the matatu businesses as they are high.
5.5 Suggestions for Further Studies
The study was only carried out on the matatus in Thika Town, thus the following were the
suggestions for further research:
i) The same study should be carried out in other matatu routes in other towns to find out
if the same results would be obtained.
ii) A study in the same line should be carried out to determine the other variables that
determine the performance of matatu Saccos in Kenya. These may include, capital
adequacy, vehicles serviceability and age), and passenger capacity.

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APPENDICES
APPENDIX I: LETTER OF INTRODUCTION

Peter Silali Musundi


P.O BOX 148,
THIKA

Dear Respondent,
I am a student at Mount Kenya University pursuing my Bachelor degree in business
management strategic management option. As one of my requirement of my course, I am
carrying out to examine: Factors influencing the performance of matatu Saccos in Thika
Town: a case of selected matatu Saccos operating in Thika town. You are kindly
requested to respond to this questionnaire by ticking () in the box. The information you
will give will be highly appreciated, treated with confidentiality and used for the purpose
of the research.
Yours Sincerely,

Peter Silali Musundi

APPENDIX II:
SURVEY QUESTIONNAIRE
This research is intended to find out the factors influencing the performance of Matatu
SACCOs in Thika Town with reference to Matatu SACCOs operating in Thika town.
All your responses will be treated with a high level of confidentiality
Kindly provide answers to the following questions by ticking () against the most
suitable alternative or giving narrative responses in the spaces provided.
SECTION A: Background Information
1.

Sex:
i)
ii)

2.

Age:
i)
ii)
iii)
iv)

3.

Male ( )
Female ( )

18-25 years ( )
26-30 years ( )
31-40 years ( )
Over 40 years ( )

Level of Education:
i)
Non-formal ( )
ii)
Primary ( )
iii)
Secondary ( )
iv)
College/University ( )

4.

Name of the Matatu SACCO:

5.

How are you related to this SACCO?


i)
ii)

6.

7.

Owner/Member ( )
Employee ( )

If an employee, which position do you hold in the SACCO?


i)
Management level employee ( )
ii)
Driver ( )
iii)
Conductor ( )
How many years have you been in the Sacco?............................................

SECTION B: Management and Business Skills

(This section is to be filled by the SACCO members/owners only)


8.

The following are statements about business management and entrepreneurial skills.
Indicate the extent to which you apply them.

Activity

Always

Sometimes Hardly

Never

Do you keep books of account?


Do you properly determine your profits?
Do you save your profits?
Do you train your employees?
Do you operate a bank account?
Do you attend seminars and workshops?
Do you inspect employees as they work?
Do you conduct market research?
Others (Specify) .
SECTION C: The Policy Framework
9.

Are the government policies good enough to promote the growth and performance of
the Matatu SACCOs?
i)
ii)

Yes
No

( )
( )

10. If yes, what are the benefits of these policies towards the growth and performance of
your Matatu SACCO?

11. If no, what are the constraints brought about by these policies towards the growth
and performance of your Matatu SACCO?

12. Are the insurance policies good enough to promote the performance of the Matatu
SACCOs?
i)

Yes ( )

ii)

No ( )

13. 14. If yes, how do your Matatu SACCO benefit from these insurance policies?

14. If no, what are some of the challenges brought about by these insurance policies?

SECTION D: Working Environment


(This section is to be filled by the SACCO employees only)
15. For how long have you been working in this SACCO?
16. Terms of employment:
i)
Permanently ( )
ii)
Temporarily ( )
iii)
On Contract ( )
Others (Specify).
17. If on contract, is written or verbal?
18. How are you paid?
i)
Daily ( )
ii)
Weekly ( )
iii)
Fortnightly ( )
iv)
Piece Rate ( )
Others Specify
19. Indicate your average daily earnings
i)
0-100 ( )
ii)
101-200 ( )
iii)
201-300 ( )
iv)
301-400 ( )
v)
401-500 ( )
vi)
501-600 ( )
Other (Specify).
20.

How many hours do work in a day? ....................................................................

21.

Are you offered any of the following allowances?


i)
ii)
iii)

Leave allowance ( )
House allowance ( )
Health allowance ( )

iv)
v)
vi)

Lunch allowance ( )
Breakfast allowance ( )
Other (Specify)
..

SECTION E: Priority Problems and Constraints Affecting the Matatu SACCOs


22.

How would you rate the performance of this Matatu SACCO in terms of income
generation?
i)
ii)
iii)
iv)

23.

Excellent ( )
Average ( )
Good ( )
Poor ( )

If not excellent, what do you think contributed to this level of performance?


Please rank these problems/constraints in the order of the priority

Problems/constraints

Priority
1

Priority
2

Priority
3

Priority
4

Lack of managerial and entrepreneurial skills


Inadequate government policies
Poor working conditions for the employees
Poor insurance policies
Insecurity, Crime and Cartels

SECTION G: Strategies and Recommendations that may improve the Performance


of Matatu SACCOs
24.

What would you suggest to be done to improve the performance of your Matatu
SACCO? Kindly rank these solutions in the order of priority.

Solutions

Priority Priority Priority

Priority

Train the employees on managerial and


entrepreneurial skills
Review government policies in the Matatu
sector
Improve the working conditions for the
employees
Improve security/ Ban Matatu Cartels

Thank you for your cooperation