Working Capital Management Practices and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in Central Region, Kenya
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Date
2023
Authors
Wangechi, Samuel Wanjohi
Journal Title
Journal ISSN
Volume Title
Publisher
KENYATTA UNIVERSITY
Abstract
Despite the great role that deposit taking savings and credit cooperative societies in central region, Kenya play in the Kenyan economy, most SACCOs have been performing poorly. Majority has reported a declining ROA from the period 2015 to 2021. Majority of the DT SACCOs in the central region have experienced drop in the Return on Assets (ROA) for the period 2017 to 2021. The goal of the research was to determine the effect of management of working capital on the financial performance of deposit taking SACCOs in Central Region, Kenya. The research sought the impact of account receivable, accounts payable management and cash management on performance. The theoretical literature review concentrated on conversion Cycle Theory, agency theory, transaction cost theory and pecking order theory. The researcher intended to use an explanatory research design. In this research, 27 DT SACCOs in Central Region, Kenya were the target populace. Due to small and manageable size of the SACCOs, the study used a census. Five years secondary data was collected (2017- 2021). After data collection of data from SASRA reports and individual SACCOs reports, the data was verified, sorted and edited before it was used for examination. STATA was used in this examination. Data was presented in form of tables and figures. Additionally, this study was guided by requirements that govern academic research done in Kenyatta University. The research obtained a permit from NACOSTI. The researcher performed the most critical pre and post estimation tests. The pre diagnostic tests included the normality tests and multicolinearity test. The post estimation tests included heteroskedasticity tests as well as hausman tests. The research indicated that cash management had a progressive and noteworthy impact. The findings further confirms that accounts receivable management had a progressive and noteworthy influence with financial success of the SACCOs. Further, accounts payable management had a negative and unworthy effect with financial success of the SACCOs. The study concluded that majority of the SACCOs had ability to collect from debtors quickly and this enhanced their performance. A further indication of how well these parties' relationships are doing is the drop in the average credit period, which shows that most SACCOs do engage with debtors to the extent of the credit duration. In addition, determining the target cash balance and cash shortages enhances the performance of the SACCO. Government and the ministry of cooperatives could create policies that are fit for the execution of cash management and accounts receivable practices in SACCOs. This will enhance efficiency and uniformity in the adoption and use of working capital practices in SACCOs. SACCOs should invest more on cash management practices since it had the highest impact on financial performance. Also, the report suggests that SACCOs establish a norm of standard liquidity place to lower the risk of losses due to excess cash at the workplace, which could arm the performance of SMEs. However, SACCOs should not put emphasis on accounts payable since it had no effect on their financial performance.
Description
A Research Proposal Submitted to School of Business, Economics and Tourism in Partial fulfillment of Requirement of Award of Degree in Master of Business Administration (Finance) of Kenyatta University