Cash Management and Performance of Microfinance Institutions in Hargeisa, Somaliland

ABSTRACT 

The study was to establish the level of cash management in the microfinance institutions in Hargeisa Somaliland. The objective included to establish the level of cash management in the microfinance institutions. To establish level of performance of the microfinance institutions and determine relationship between cash management and performance of the microfinance institutions in Hargeisa Somaliland. The study was based on descriptive correlation and a cross sectional survey designs. The study concentrated on the five microfinance institutions located in Hargeisa with the sample population of 1 12 were questionnaires were used to collect data and a response rate of 95(106) questionnaires returned back. The study findings reveal that cash management in microfinance institutions in Hargeisa, Somaliland was poor and it was evident with the overall mean (M=2.53, Standard Deviation=l .49) that refers to poor in the rating scale. Performance of micro finance institution in Hargeisa the results shows a fair performing business and this finding was supported by the overall mean average of 2.75 and standard deviation of.90 there was a significant relationship between cash management and performance of microfinance institutions. The researcher concludes that cash management in the microfinance institutions are generally poor with disbursements management, debtor’s management and cash collection revealing fair and poor response rates implying that cash management was ineffective on the dimensions mentioned. On the second research objective, the performance of the microfinance institutions as regards profitability, sales and market growth seemed fair but many of their individual constructs had poor features which are a precursor to poor management of the performance under takings and finally on the third objective the study on the relationship between cash management and performance of microfinance institutions based on the null hypothesis is rejected as the correlation between the two variables reveals that there is a significant relationship between the study variables. Analysis of variance also suggested that there was a significant effect between the variables, the researcher in that regard concluded that no significant relationship existed between cash management and performance of microfinance institutions. The researcher therefore recommends for enhancing cash management and improving the performance dimensions of the microfinance institutions in Hargeisa, Somaliland as means of enabling the microfinance institutions to operate and attain their goals and objectives.

TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION jjj

ACKNOWLEDGEMENTS iv

TABLE OF CONTENTS v

LIST OF TABLES

ABSTRACT

CHAPTER ONE 1

INTRODUCTION 1

1.0 Introduction 1

1.1 Background of the study 1

1.1.1 Historical Perspective i

1.1.2 Theoretical Perspective 3

1.1.3 Conceptual Perspective 4

1.1.4 Contextual Perspective 5

1.2 Problem Statement 6

1.3 Purpose of the study 6

1.4 Objectives of the study 6

1.5 Research questions 7

1.6. Hypothesis 7

1.7 Scope of the study 7

1.7.1 Geographical scope 7

1.7.2 Content Scope 7

1.7.3 Time Scope 7

1.7.4 Theoretical Scope 8

1.8 Significance of the study 8

CHAPTER TWO 9

LITERATURE REVIEW 9

2.0 Introduction 9

2.1 Theoretical review 9

2.2 Conceptual framework .11

2.3 Level of Cash management in micro finance institutions 11

2.3.1 Disbursement management 12

2.3.2 Cash Collection 13

2.3.3 Debtor’s management 15

2.4 Level of performance of micro finance institutions in Somaliland 17

2.4.1 Profitability 17

2.4.2 Sales growth 18

2.4.3 Market growth 18

2.5Relationship between cash management and performance of microfinance institutions 19

2.6 Research Gaps 22

CHAPTER THREE 24

METHODOLOGY 24

3.0 Introduction 24

3.2 Research Design 24

3.2 Research Population 24

3.3 Sample Size 24

3.4 Sampling Procedure 26

3.5 Research Instruments 26

3.5.1 Questionnaires 26

3.6 Validity and Reliability of the Instruments 26

3.7 Data Gathering Procedures 28

3.7.1 Before the administration of the questionnaires 28

3.7.2 During the administration of the questionnaires 28

3.7.3 Afier the administration of the questionnaires 28

3.8 Data Analysis 28

3.9 Ethical Considerations 29

3.10 Limitations of the study 29

CHAPTER FOUR 31

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 31

4.0 Introduction 31

4.1 Demographic Characteristics of Respondents 31

4.2 Level of cash management in microfinance institutions in Hargeisa Somaliland 33

4.3 Level of Performance on micro finance institution in Hargeisa, Somaliland 36

4.5 Relationship between cash management and performance of microfinance institutions in Hargeisa, Somaliland 40

CHAPTER FIVE 43

DISCUSSION OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS 43

5.0 Introduction 43

5.1 Discussion of Findings 43

5,2 Conclusions 46

5.3 Recommendations 47

5.4 Areas of further research 47

5.5 Contribution to the knowledge 48

REFERENCES 49

Appcndix I: Questionnaire 55