Liquidity Management And Financial Performance Of Savings And Credit Cooperative Organizations In Kenya (A Survey Of Saccos In Nairobi County)

Abstract

Generally, the global market has witnessed competition that makes it liquidity management necessary for financial performance of SACCOs. Some SACCOs especially those that are deposit taking accepts savings from customers and therefore creating liabilities. At the same time, SACCOs also lend out funds to members and other investors. While the deposits from customers are on short term horizon, lending to investors by SACCOs are on long time horizon, and this results into liquidity risk. Liquidity management is one of the most crucial aspects of financial management. Its main objective is to maintain an optimal balance between current assets and current liabilities between each of the working capital components. Thus, the objective of this study was to assess the effect of Liquidity Management on Financial Performance of SACCOs within in Kenya. The study adopted a descriptive survey design and targeted all the 42 SACCOs operating in Nairobi. The study targeted 42 employees in 42 SACCOs. A census approach was used as the population was relatively small to sample. The study collected primary data using a structured questionnaire. The collected data was analyzed using measures of central tendency including mean and standard deviations. The study used the F Statistic to determine the validity of the regression model adopted. The analyzed data were presented using tables and charts. The findings of the study indicated that cash flow management (p=0.04<0.05) and contingency funding management (p=0.000<0.05) all significantly affected financial performance of SACCOs. The study concluded that credit risk management had insignificant influence on financial performance of SACCOs. Cash flow management had significant influence on financial performance of SACCOs. Cash flow management had a positive influence on financial performance of SACCOs. Contingency funding management had a significant influence on financial performance of SACCOs. Compared with cash flow management, contingency funding management had a greater influence on financial performance of SACCOs. The study recommended that extent of funding management affects financial performance. External variables that affect cash management which poses a greater risk in the operations of the institutions. Contingency funding should include a pre-funding for what the management team estimated will be the potential cash and collateral needs as well as utilizing secondary sources of liquidity.