Effect of Liquidity Management On Financial Performance of Tier One Deposit Taking Saccos in Kenya

Abstract

All types of companies, including SACCOs, rely heavily on liquidity management to determine how well they do financially. To keep members' trust, satisfy withdrawal requests, and keep operations running, SACCOs must practice excellent liquidity management, as member deposits are the primary source of funds for lending activities. The general objective of the study was to determine the effect of liquidity management on financial performance of tier one DT-SACCOs in Kenya. The specific objectives included: to determine the effect of cash management on financial performance of tier one DT-SACCOs in Kenya, to examine the effect of loan repayment on financial performance of tier one DT-SACCOs in Kenya, to assess the effect of non-core investment on financial performance of tier one DT-SACCOs in Kenya, to determine the moderating effect of regulatory framework on the effect of liquidity management on financial performance of tier one DT-SACCOs in Kenya. The evaluated theories were grounded on the fundamental factors. Trade-off theory, financial intermediation theory, portfolio theory, and institutional theory are the four theories under question. This study used a descriptive research approach. In all, the target audience consisted of 166 individuals, including accountants, credit managers, risk managers, internal auditors, and compliance officials. A stratified sampling technique was used in this study. Primary data was collected mostly through the use of a questionnaire. Furthermore, the researcher not only acquired official approval from the National Council for Research, Science and Technology but also pursued university clearance. The study demonstrated that there was a favorable impact on the financial performance of tier one DT-SACCOs from three distinct objectives: cash management, loan repayment, and non-core investment. The Pearson correlation coefficient between financial performance and cash management is (0.787,p < 0.01). The correlation between financial performance and loan repayment is also substantial, with a Pearson correlation coefficient of (0.622, p < 0.01). Non-core investment has a moderate positive correlation with financial performance, as indicated by a Pearson correlation coefficient of (0.515, P < 0.01). The correlation between financial performance and the regulatory framework is strong, with a Pearson correlation coefficient of (0.644, p < 0.01). Managerial Recommendations: Enhance Cash Management Practices, Improve Loan Repayment Processes, Strategically Manage Non-Core Investments, Strengthen Regulatory Compliance and Internal Management. Policy Recommendations: Develop Comprehensive Cash Management Policies, Implement Rigorous Loan Repayment Policies, Establish Strategic Investment Policies for Non-Core Activities and Strengthen Regulatory Compliance Frameworks.