Influence Of Liquidity Risk Management Practices On Financial Performance Of Licenced Deposit Taking Saccos In Nairobi Kenya

Abstract

This study sought to evaluate influence of liquidity risk management practices on the financial performance of licensed deposit taking SACCOs in Nairobi, Kenya. The following objectives guided the study: to investigate the influence of asset quality management practices on the financial performance of licensed deposit taking SACCOs in Nairobi, Kenya; to assess the influence of capital adequacy practices on the financial performance of licensed deposit taking SACCOs in Nairobi, Kenya; and to evaluate the influence of capital leverage practices on financial performance of licensed deposit taking SACCOs in Nairobi County. The study is based on three theories which are liquidity preference theory, loanable funds theory and theory of pecking order. The study used descriptive research design. The study targeted population 41 licensed deposit taking SACCOs in Nairobi, Kenya. The data collection involved the documentary reviews of information available in financial statements and annual reports. The study relied on secondary data sources. Descriptive and inferential statistics were employed to analyze quantitative data. The study employed panel regression analysis model using Statistical Package for Social Sciences (SPSS) version 24. Data was presented in the form of tables and charts. The study found that asset quality; capital adequacy and capital leverage significantly affect financial performance of SACCOs. The study recommends that SACCOs should work to increase capital adequacy and asset quality ratio. The study also recommends that deposit taking SACCOs should maintain a liquidity ratio that is enough to comply with SASRA regulations and at the same time ensuring an optimum liquidity level to minimize the institution’s liquidity risks. Further studies should be conducted to investigate other factors responsible for financial performance of deposit taking SACCOs. Keywords: Savings and Credit Cooperatives, Gross Domestic Product, International Monetary Fund