Liquidity Management and Financial Performance of Teachers Deposit Taking Savings and Credit Cooperative Societies in Kenya

Abstract

DT Saccos play a crucial role as financial intermediaries in the provision of credit and mobilisation savings in a secure environment. Liquidity management is crucial because it impacts on the DT Saccos financial performance and ability to increase member's wealth. DT Sacco sector in Kenya has experienced a decline in financial performance as reflected in the lower rate of returns to its members thus hindering their growth & competitiveness. The loss of earnings can lead to members losing confidence as it reduces DT Saccos ability to meet the monetary demands of its members. The global financial crisis between 2007 and 2009 opened up new scenarios for the cooperative movement with DT Saccos emerging as credible alternative providers of credit facilities. The study objective was to establish the effect of liquidity management on the financial performance of Teachers DT Saccos in Kenya and to evaluate the moderating effect of the size on liquidity management and financial performance of Teachers DT Saccos in Kenya. The study proxied surplus for the financial performance-dependent variable with liquidity management ratios prescribed by SASRA as the independent variables and logarithm of total assets as a proxy for the size. The study design was a descriptive survey and collected data from SASRA regulatory filings for the period 2011- 2018 from eighteen DT Saccos classified as teachers' based licensed DT Saccos. Data were analysed using a combination of descriptive and inferential statistics with the statistical package STATA. The study established that there was a significant effect of capacity and purchased funds on the financial performance of Teachers DT Saccos. The study also established that cash position, total deposit, and core deposit had an insignificant effect on the financial performance of Teachers DT Saccos and that size of the Sacco significantly affects the relationship between liquidity management and financial performance of Teachers DT Saccos. The study recommended the development of a more robust liquidity monitoring policy as well as enhancement of the oversight on liquidity management practices. The study also recommended that Teachers DT Saccos should reduce the provisions of loan losses as well as their reliance on external borrowing. Further the study recommended future studies using other factors influencing liquidity in the Teachers DT Saccos. Lastly the study recommends a comparative study using other financial intermediaries with similar deposit and asset features such as Deposit Taking Micro Finance Institutions.