The study was conducted in the Mbeya region of Tanzania, analyzing how corporate governance and the legal environment affected the financial performance of Savings and Credit Cooperative Societies (SACCOS), with a focus on the mediating role of corporate governance. A quantitative survey utilizing a census of 83 active SACCOS collected primary data via structured questionnaires. The study reveals that corporate governance has a substantial and positive direct effect on the financial performance of SACCOS (β = 0.966, p < 0.001). Moreover, the legal environment has a strong positive influence on corporate governance itself (β = 0.977, p < 0.001). Remarkably, the direct link between the legal environment and financial performance is negative and significant (β = ？0.098, p = 0.027). Nevertheless, corporate governance fully mediates the relationship between the legal environment and financial performance, resulting in a strong positive indirect effect of the legal environment on performance (β = 0.944, p < 0.001). This study underscores the critical importance of robust corporate governance for financial viability of SACCOs, particularly in challenging legal environments. Policy makers and SACCOS management should prioritize strengthening governance frameworks to enhance financial performance and mitigate legislative challenges in Tanzania and all other Sub-Saharan African nations, where the literature mentions such challenges. This study empirically enriches institutional theory by providing evidence of these relationships within African SACCOS, offering valuable theoretical and practical insights.
Cite this paper
Mbegu, S. (2026). Legal Environment and SACCOS Financial Performance in Mbeya, Tanzania: Mediated by Corporate Governance
. Open Access Library Journal, 13, e14757. doi: http://dx.doi.org/10.4236/oalib.1114757.
Said, M.S., Annuar, H.A. and Hamdan, H.B. (2019) An Investigation into the Fi-nancial Sustainability of Islamic Saving, Credit Cooperative Society (SACCOS) in Tanzania. International Journal of Ethics and Systems, 35, 242-259. https://doi.org/10.1108/ijoes-11-2018-0159
Kyazze, L.M., Nsereko, I. and Nkote, I. (2020) Cooperative Practices and Non-Financial Performance of Savings and Credit Cooperative Societies. International Journal of Ethics and Systems, 36, 411-425. https://doi.org/10.1108/ijoes-06-2020-0087
Shkeily, H. and Abdullah, N. (2021) The Critical Determinants of Saccos Growth in Tanzanias Zanzibar. Advances in Mathematics: Scientific Journal, 10, 1469-1483. https://doi.org/10.37418/amsj.10.3.35
Towo, N.N., Ishengoma, E. and Mori, N. (2022) Relationship Lending and Financial Performance of Savings and Credit Co-Operative Societies in Tanzania. African Journal of Economic and Management Studies, 13, 614-635. https://doi.org/10.1108/ajems-03-2021-0139
TCDC (2023) Tanzania Cooperative Development Commission Annual Report. https://www.ushirika.go.tz/uploads/TCDC_SACCOS_ANNUAL_PERFORMANCE_REPORT_2023.pdf
Xue, W., Li, H., Ali, R. and Rehman, R.U. (2020) Knowledge Mapping of Corporate Financial Performance Research: A Visual Analysis Using Cite Space and UCINET. Sustainability, 12, Article 3554. https://doi.org/10.3390/su12093554
Singh, K. and Rastogi, S. (2022) Corpo-rate Governance and Financial Performance: Evidence from Listed SMEs in In-dia. Benchmarking: An International Journal, 30, 1400-1423. https://doi.org/10.1108/bij-09-2021-0570
Siedel, G.J. (2000) Six Forces and the Legal Environment of Business: The Relative Value of Business Law among Business School Core Courses. American Business Law Journal, 37, 717-741. https://doi.org/10.1111/j.1744-1714.2000.tb00283.x
United Republic of Tanzania (2013) The Cooperative Societies Act, No. 6 of 2013. Ministry of Agriculture. https://www.ushirika.go.tz/uploads/The-Cooperative-Societies-Act-2013.pdf
United Republic of Tanzania (1982) The Cooperative Audit and Supervi-sion Act, No. 15 of 1982. Cooperative Audit and Supervision Corporation (COASCO). https://www.coasco.go.tz/uploads/documents/sw-1725357607-COASCO%20ACT%201982.pdf
United Republic of Tanzania (2018) The Microfinance Act, 2018. Bank of Tanza-nia.https://www.bot.go.tz/Publications/Acts,%20Regulations,%20Circulars,%20Guidelines/Acts/en/202002130644421418.pdf
United Republic of Tanzania (2019) The Income Tax Act (Cap. 332 Revised Edition 2019). Minis-try of Finance. https://www.mof.go.tz/uploads/documents/en-1676545432-THE%20INCOME%20TAX%20ACT,%20CAP%20332%20R.E.%202019.pdf
Oliveira, A., Carvalho, F. and Reis, N.R. (2022) In-stitutions and Firms’ Performance: A Bibliometric Analysis and Future Research Avenues. Publications, 10, Article 8. https://doi.org/10.3390/publications10010008
Carruthers, B.G. (2020) Law, Governance, and Finance: Introduction to the Theory and Society Special Issue. Theory and Society, 49, 151-164. https://doi.org/10.1007/s11186-020-09390-5
Organisation for Eco-nomic Co-Operation and Development (2004) OECD Principles of Corporate Governance. OECD Publishing. https://www.oecd.org/content/dam/oecd/en/publications/reports/2004/05/oecd-principles-of-corporate-governance-2004_g1gh44a5/9789264015999-en.pdf
Earnest, D.F. and Sofian, S. (2013) The Mediating Role of Corporate Governance on Intellectual Capital and Corporate Performance. Journal of Eco-nomics, Business and Management, 1, 339-342. https://doi.org/10.7763/joebm.2013.v1.73
Ngatno, Apriatni, E.P. and Youlianto, A. (2021) Moderating Effects of Corporate Governance Mechanism on the Relation between Capital Structure and Firm Performance. Cogent Busi-ness & Management, 8, Article ID: 1866822. https://doi.org/10.1080/23311975.2020.1866822
Agyemang, J.K. and Bardai, B.B. (2022) The Mediating Effect of Corporate Governance on the Rela-tionship between Accounting Information and Stock Market Return of Listed Entities in Ghana. Journal of Modern Accounting and Auditing, 18, 60-89. https://doi.org/10.17265/1548-6583/2022.02.002
Sahin, K. and Mert, K. (2022) Institutional Theory in International Business Studies: The Period of Period of 1990-2018. International Journal of Organizational Analysis, 31, 1957-1986. https://doi.org/10.1108/ijoa-09-2021-2945
Aguilera, R.V., Marano, V. and Haxhi, I. (2019) International Corporate Governance: A Review and Opportunities for Future Research. Journal of International Business Stud-ies, 50, 457-498. https://doi.org/10.1057/s41267-019-00232-w
Marus, E., Benon, C.B. and Fabian, M. (2020) Co-Operative and Saving Societies (SAC-COS) and Poverty Reduction in Lango and Kigezi Sub-Regions of Uganda: A Comparative Empirical Study. African Journal of Business Management, 14, 278-290. https://doi.org/10.5897/ajbm2020.9053
Ochieng, O.S.P. (2018) Determinants of Financial Performance of Savings and Credit Coopera-tive Societies in Nakuru Town, Kenya. IOSR Journal of Business and Manage-ment (IOSR-JBM), 20, 36-45.
Magali, J.J. (2014) Variables for Modeling SACCOS in Tanzania. Asian Journal of Finance & Accounting, 6, 198-215. https://doi.org/10.5296/ajfa.v6i1.5290
Lupia, J. and Kagata, L. (2024) Evaluation of the Performance and Constraints of Savings and Credit Coopera-tive Societies (SACCOs) in Tanzania. Mbeya University of Science and Technol-ogy Journal of Research and Development, 5, 854-862. https://doi.org/10.62277/mjrd2024v5i30055
Qin, X. and Otieno Ndie-ge, B. (2013) Role of Financial Development in Economic Growth: Evidence from Savings and Credits Cooperative Societies in Tanzania. International Journal of Financial Research, 4, 115-125. https://doi.org/10.5430/ijfr.v4n2p115
Temu, S.S. and Ishengoma, E.K. (2010) Financial Linkages and Performance of Rural Microfinance Cooperatives: Tanzanian Case. Indian Journal of Economics and Busi-ness, 9, 285-302.
Towo, N.N. (2022) Financial Leverage and Financial Perfor-mance of Savings and Credit Co-Operative Societiesin Tanzania. International Journal of Rural Management, 19, 214-233. https://doi.org/10.1177/09730052221077846
Nyangarika, A. and Bundala, F.S. (2020) Socio-Economic Factors Affecting Deposits Growth in SACCO’s Development Case of Geita Tanzania. International Journal of Advance Research and Innovative Ideas in Education, 6, 1273-1288.
Kumkit, T., Anh, D.L.T., Gan, C. and Hu, B. (2023) Members’ Perspectives of Good Govern-ance Practice of Thailand’s Credit Union Cooperatives. Journal of Asian Business and Economic Studies, 31, 55-73. https://doi.org/10.1108/jabes-06-2022-0154
Messabia, N., Beauvoir, E. and Kooli, C. (2022) Governance and Management of a Savings and Credit Co-operative: The Successful Example of a Haitian Sacco. Vision: The Journal of Business Perspective, 27, 397-409. https://doi.org/10.1177/09722629221074130
Otache, I., Echukwu, I.J., Umar, K., Yunusa, A. and Audu, S. (2022) Internal Factors Affecting the Per-formance of Employee-Based Savings and Credit Cooperatives: Evidence from Nigeria. Journal of Enterprising Communities: People and Places in the Global Economy, 17, 1154-1170. https://doi.org/10.1108/jec-03-2022-0046
Mnyone H. (2017) Biashara LEO: Saccos zishughulikie changamoto zilizopo kuboresha huduma zake. MWANANCHI. https://www.mwananchi.co.tz/mw/habari/makala/biashara/biashara-leo-SACCOS-zishughulikie-changamoto-zilizopo-kuboresha-huduma-zake-2836416
Janik, A., Ryszko, A. and Szafraniec, M. (2021) Exploring the Social Innovation Research Field Based on a Comprehensive Bibliometric Analysis. Journal of Open Innovation: Technology, Market, and Complexity, 7, Article 226. https://doi.org/10.3390/joitmc7040226
Meyer, J.W. and Rowan, B. (1977) Institutionalized Organizations: Formal Structure as Myth and Ceremo-ny. American Journal of Sociology, 83, 340-363. https://doi.org/10.1086/226550
Robertson, J., Dowling, M., Washington, M., Leopkey, B., Lee Ellis, D. and Smith, L. (2022) Institutional Theory in Sport: A Scoping Review. Journal of Sport Management, 36, 459-472. https://doi.org/10.1123/jsm.2021-0179
Zhao, E.Y., Fisher, G., Louns-bury, M. and Miller, D. (2016) Optimal Distinctiveness: Broadening the Inter-face between Institutional Theory and Strategic Management. Strategic Man-agement Journal, 38, 93-113. https://doi.org/10.1002/smj.2589
Yang, Z. and Su, C. (2014) Institutional Theory in Business Marketing: A Conceptual Framework and Future Directions. Industrial Marketing Management, 43, 721-725. https://doi.org/10.1016/j.indmarman.2014.04.001
Polzer, T. (2022) “What Is Going on in the ‘Big Tent’?” Current Developments in (New) Institutional Theory and Performance Measurement and Management Re-search. Journal of Public Budgeting, Accounting & Financial Management, 34, 137-145. https://doi.org/10.1108/jpbafm-10-2021-0145
Littlewood, D., Ciambotti, G., Holt, D. and Steinfield, L. (2022) Special Issue Editorial: Social Innovation and Entrepreneurship in Africa. Africa Journal of Management, 8, 259-270. https://doi.org/10.1080/23322373.2022.2071579
Gomez, L. (2016) How Does Rule of Law Affect Firm Performance? Comparing the Effect of Rule of Law in Companies Located in Countries with Different Level of Development. Journal of Development Eco-nomics, 85, 1-26.
Arias, J., Maquieira, C. and Jara, M. (2019) Do Legal and Institutional Environments Matter for Banking System Performance? Eco-nomic Research-Ekonomska Istraživanja, 33, 2203-2228. https://doi.org/10.1080/1331677x.2019.1666023
Quayes, S. and Jo-seph, G. (2016) Legal Systems and Performance of Microfinance Institutions. International Review of Applied Economics, 31, 304-317. https://doi.org/10.1080/02692171.2016.1249832
Hermawan, S., Hanif, A., Biduri, S., Nurasik, and Wijayanti, P. (2021) Intellectual Capital, Cor-porate Social Responsibility, and Good Corporate Governance on Banking Finan-cial Performance in Indonesia. Proceedings of 2nd Annual Management, Busi-ness and Economic Conference (AMBEC 2020), 5 September 2020, 10-16. https://doi.org/10.2991/aebmr.k.210717.003
Boachie, C. (2021) Corporate Governance and Financial Performance of Banks in Ghana: The Mod-erating Role of Ownership Structure. International Journal of Emerging Mar-kets, 18, 607-632. https://doi.org/10.1108/ijoem-09-2020-1146
Alobari, C., Igbara, F.N., Tordee, B. and Domale, E. (2019) Financial Performance, Corporate Govern-ance and Microfinance Institutions Sustainability in Nigeria. Equatorial Journal of Finance and Management Sciences, 3, 30-43.
Aguilera, R.V. and Jack-son, G. (2003) The Cross-National Diversity of Corporate Governance: Dimen-sions and Determinants. The Academy of Management Review, 28, 447-465. https://doi.org/10.2307/30040732
Daily, C.M., Dalton, D.R. and Can-nella, A.A. (2003) Corporate Governance: Decades of Dialogue and Data. The Academy of Management Review, 28, 371-382. https://doi.org/10.2307/30040727
Wu, M., Zhao, K. and Fils-Aime, F. (2022) Response Rates of Online Surveys in Published Research: A Meta-Analysis. Computers in Human Behavior Reports, 7, Article ID: 100206. https://doi.org/10.1016/j.chbr.2022.100206
Hair, J.F., Hult, G.T.M., Ringle, C.M. and Sarstedt, M. (2022) A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). 3rd Edition, Sage Publica-tions.
Mushafiq, M., Sindhu, M.I. and Sohail, M.K. (2021) Financial Per-formance under Influence of Credit Risk in Non-Financial Firms: Evidence from Pakistan. Journal of Economic and Administrative Sciences, 39, 25-42. https://doi.org/10.1108/jeas-02-2021-0018
Mallett, O., Wapshott, R. and Vorley, T. (2018) How Do Regulations Affect SMEs? A Review of the Quali-tative Evidence and a Research Agenda. International Journal of Management Reviews, 21, 294-316. https://doi.org/10.1111/ijmr.12191
Purwanto, A. and Sudargini, Y. (2021) Partial Least Squares Struc-tural Squation Modeling (PLS-SEM) Analysis for Social and Management Re-search: A Literature Review. Journal of Industrial Engineering & Management Research, 2, 114-123.
Cepeda-Carrión, G., Hair, J.F., Ringle, C.M., Roldán, J.L. and García-Fernández, J. (2022) Guest Editorial: Sports Management Re-search Using Partial Least Squares Structural Equation Modeling (PLS-SEM). International Journal of Sports Marketing and Sponsorship, 23, 229-240. https://doi.org/10.1108/ijsms-05-2022-242
Nitzl, C., Roldan, J.L. and Cepeda, G. (2016) Mediation Analysis in Partial Least Squares Path Modeling: Helping Researchers Discuss More Sophisticated Models. Industrial Manage-ment & Data Systems, 116, 1849-1864. https://doi.org/10.1108/imds-07-2015-0302
Cepeda, G., Roldán, J.L., Sabol, M., Hair, J. and Chong, A.Y.L. (2024) Emerging Opportunities for Infor-mation Systems Researchers to Expand Their PLS-SEM Analytical Toolbox. In-dustrial Management & Data Systems, 124, 2230-2250. https://doi.org/10.1108/imds-08-2023-0580
Lutfi, A., Alrawad, M., Al-syouf, A., Almaiah, M.A., Al-Khasawneh, A., Al-Khasawneh, A.L., et al. (2023) Drivers and Impact of Big Data Analytic Adoption in the Retail Industry: A Quantitative Investigation Applying Structural Equation Modeling. Journal of Retailing and Consumer Services, 70, Article ID: 103129. https://doi.org/10.1016/j.jretconser.2022.103129
Cepeda Carrión, G., Henseler, J., Ringle, C.M. and Roldán, J.L. (2016) Prediction-Oriented Modeling in Business Research by Means of PLS Path Modeling: Introduction to a JBR Special Section. Journal of Business Research, 69, 4545-4551. https://doi.org/10.1016/j.jbusres.2016.03.048
Dash, G. and Paul, J. (2021) CB-SEM vs PLS-SEM Methods for Research in Social Sciences and Tech-nology Forecasting. Technological Forecasting and Social Change, 173, Article ID: 121092. https://doi.org/10.1016/j.techfore.2021.121092
Akter, S., Fosso Wamba, S. and Dewan, S. (2017) Why PLS-SEM Is Suitable for Complex Modelling? An Empirical Illustration in Big Data Analytics Quality. Production Planning & Control, 28, 1011-1021. https://doi.org/10.1080/09537287.2016.1267411
Mukama, R.J. (2021) Regulatory ‘Tactics’ in the Regulation of Primary SAC-COS’ Credit Ad-vancement in Tanzania: Shifting the Paradigm. BiLD Law Journal, 6, 104-121.
Teece, D.J., Pisano, G. and Shuen, A. (1997) Dynamic Capabilities and Strategic Management. Strategic Management Jour-nal, 18, 509-533. https://doi.org/10.1002/(sici)1097-0266(199708)18:7<509::aid-smj882>3.0.co;2-z
Lemonakis, C., Malandrakis, I., Garefalakis, A. and Balla, V. (2018) Corporate Governance and Internal Audit: A Review on Performance Indicators. Interdisciplinary Journal of Economics and Business Law, 7, 98-199.
Limijaya, A., Martowidjojo, Y.H. and Hartanto, E. (2021) Intellec-tual Capital and Firm Performance in Indonesia: The Moderating Role of Cor-porate Governance. International Journal of Managerial and Financial Account-ing, 13, 159-182. https://doi.org/10.1504/ijmfa.2021.117772
El-Abiad, Z., Braendle, U. and El-Chaarani, H. (2023) Formulation of a Corporate Gov-ernance Index for Banking Sector: The GIB.X62. Heliyon, 9, e15253. https://doi.org/10.1016/j.heliyon.2023.e15253
Sewaka, D.K. and Ugeng, B.H. (2020) Performance Measurement Analysis Using Balance Score-card (Case Study of PT. Bangun Selaras, Indonesia). International Journal of Innovative Science and Research Technology, 5, 611-616.
Lin, C., Yang, H. and Liou, D. (2009) The Impact of Corporate Social Responsibility on Financial Performance: Evidence from Business in Taiwan Region. Technology in Society, 31, 56-63. https://doi.org/10.1016/j.techsoc.2008.10.004
Harningrum, Y.L. and Aisyah, M.N. (2021) Performance Measurement Analysis Using Bal-ance Scorecard in Dr. H. Soewondo Kendal Hospital. Nominal: Barometer Riset Akuntansi dan Manajemen, 10, 71-81. https://doi.org/10.21831/nominal.v10i1.32583
Wagner, R. and Grimm, M.S. (2023) Empirical Validation of the 10-Times Rule for Sem. In: Radomir, L., Ciornea, R., Wang, H., Liu, Y., Ringle, C.M. and Sarstedt, M., Eds., State of the Art in Partial Least Squares Structural Equation Modeling (PLS-SEM), Springer, 3-7. https://doi.org/10.1007/978-3-031-34589-0_1
Wah, J.N.K. (2025) De-coding Structural Equation Modeling: Insights on Data Assumptions, Normality, and Model Fit in Advancing Digital Marketing Strategies. Journal of Cases on In-formation Technology, 27, 1-20. https://doi.org/10.4018/jcit.369092
Hair, J. and Alamer, A. (2022) Par-tial Least Squares Structural Equation Modeling (PLS-SEM) in Second Language and Education Research: Guidelines Using an Applied Example. Research Methods in Applied Linguistics, 1, Article ID: 100027. https://doi.org/10.1016/j.rmal.2022.100027
Cheung, G.W., Cooper-Thomas, H.D., Lau, R.S. and Wang, L.C. (2023) Reporting Reliability, Convergent and Discriminant Validity with Structural Equation Modeling: A Re-view and Best-Practice Recommendations. Asia Pacific Journal of Management, 41, 745-783. https://doi.org/10.1007/s10490-023-09871-y
Usakli, A. and Rasoolimanesh, S.M. (2023) Which SEM to Use and What to Report? A Comparison of CB-SEM and PLS-SEM. In: Okumus, F., Rasoolimanesh, S.M. and Jahani, S., Eds., Cutting Edge Research Methods in Hospitality and Tourism, Emerald Publishing Limited, 5-28. https://doi.org/10.1108/978-1-80455-063-220231002
Ebabu En-gidaw, A. (2021) The Effect of External Factors on Industry Performance: The Case of Lalibela City Micro and Small Enterprises, Ethiopia. Journal of Innova-tion and Entrepreneurship, 10, Article No. 10. https://doi.org/10.1186/s13731-021-00147-7
Owuoth, L. (2024) Cor-porate Governance and Financial Performance of Savings and Credit Coopera-tive Organizations in Western Kenya. Doctoral Dissertation, University of Nairo-bi.
Kyere, M. and Ausloos, M. (2020) Corporate Governance and Firms Financial Performance in the United Kingdom. International Journal of Finance & Economics, 26, 1871-1885. https://doi.org/10.1002/ijfe.1883
Miloud, T. (2022) Corporate Governance and the Capital Structure Behavior: Empirical Evidence from France. Managerial Finance, 48, 853-878. https://doi.org/10.1108/mf-12-2021-0595
Ghosh, S. and Sahu, T.N. (2025) Sustainable Futures: Corporate Governance and Environmental Chal-lenges. Routledge. https://doi.org/10.4324/9781003631323
Mahmood, G., Shakir, M.M.N., Sohail, N. and Khan, Q.M. (2025) Leverage and Dividend Policy as Mediators in the Corporate Governance and Firm Performance Rela-tionship: Insights from Manufacturing Firms in Pakistan. Contemporary Journal of Social Science Review, 3, 2123-2138.
Cosa, M. (2024) How Institutional Pressures Drive Learning and Memory in Organizations. In: Bataglia, W. and Segura, L.C., Eds., Impacts of Innovation and Cognition in Management, IGI Global, 231-262. https://doi.org/10.4018/979-8-3693-5777-4.ch010
