Liquidity Risk and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in Kenya
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Date
2022
Authors
Wanjiru, Peter Njuguna
Jagongo, Ambrose
Journal Title
Journal ISSN
Volume Title
Publisher
IJFA
Abstract
To investigate the effect of liquidity risk on
financial performance of DT-SACCOs in Kenya
Materials and Methods: The study will adopt descriptive
research design with data comprising of secondary, panel
data which will be collected from the 175 DT-SACCOs for
the period of five years between the years 2016-2020.
Census sampling will be adopted where all the 175 DTSACCOs will be considered in the analysis. Data will be
collected from audited financial statements and other
relevant reports submitted by the DT-SACCOs to SASRA.
Results: Financial performance of DT-SACCOs has been
unstable and fluctuating over the years as measured by
ROA. In 2016, ROA was 2.45 percent which rose to 2.69
percent in 2017. In 2018, it dropped to 2.40 percent before
rising to 2.60 percent in 2019 and again rising to 2.65
percent in 2020. One the other hand, liquid assets to total
assets ratio has been reducing. In 2016 it was 12.49
percent, 11.85 percent in 2017, 11.77 percent in 2018, and
11.62 in 2019 only to rise to 14.43 in 2020 (SASRA
Report, 2020). This reflects the oscillation in liquidity
thereby posing liquidity risk. As reflected by the existing
empirical literature, there is an inconsistency and consensus
on the research findings on whether liquidity risk affects
financial performance of DT-SACCOs in Kenya.
Unique contribution to theory, Practice and Policy:
Scholars and other researchers interested in the SACCO
sub-sector will benefit from the findings of this study. The
findings will add to the body of knowledge existing in this
field and provide opportunities for further research in this
area. Results from the study will be useful to SASRA and
other policy-makers in the SACCO sub-sector to strengthen
their regulatory framework as well as in development of a
more robust liquidity monitoring policy and enhancement
of liquidity management practices. The results will be
beneficial to SACCO managers and the board members as
it will highlight how profitability is affected by liquidity
risk thereby developing more robust liquidity monitoring
policy as well as enhancement of oversight on liquidity
management practices. SACCO members may get an
impetus to continuously hold the management accountable
on the level of the profitability. This is so because the
members stand to benefit most if liquidity risk is low. In
addition, it may lead to members’ satisfaction and trust in
the societies and hence increased share contribution.
Description
Article
Keywords
Liquidity risk, Financial performance, Deposit Taking Savings, Credit Cooperative societies
Citation
Wanjiru, P. ., & Jagongo, A. (2022). LIQUIDITY RISK AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KENYA. International Journal of Finance and Accounting, 7(1), 1 – 14. https://doi.org/10.47604/ijfa.1465