Financial Factors Affecting Liquidity of Savings and Credit Co-operative Societies in Kirinyaga County, Kenya

Savings and Credit Co-operative Societies are quasi financial institutions that mobilize savings, provide loans as well as other products to their members. Liquidity is considered as one of the serious concern and challenge for the modern era SACCOs. A SACCO having good asset quality, strong earnings and sufficient capital may fail if it is not maintaining adequate liquidity. The general objective of the study was to assess the financial factors that influence liquidity of Savings and Credit Co-operatives Societies in Kenya. A cross-sectional survey research design was used in this study. The target population consisted of all the 60 registered SACCOs in Kirinyaga County from which a sample size of 18 SACCOs was drawn. The study employed stratified random sampling technique. Primary data was collected by use of self-administered semi-structured questionnaires, while secondary data was collected from audited financial statements of the SACCOs and regulator. A pilot test was conducted to ascertain the validity and reliability of questionnaire. The Cronbach’s alpha coefficient was used for reliability test while the content validity technique was used in validating the research instruments. The data was analyzed using descriptive statistics tools such as percentages, mean, standard deviation, mode and variances. Inferential statistics was done by use of Pearson’s product moment of correlation. Multiple regression analysis was performed to assess the relationship between study variables. R2 was used to assess the contribution of independent variable on dependent variable. Data was presented using frequency tables, charts and graphs. The F-test was used to evaluate the significance of the obtained results. The study findings is of great importance to the SACCO management to formulate proper policies. The study helps the regulator and the government to improve on the framework for regulation of SACCO’s. The study found the relationship between liquidity management, net cash flows, credit lending and investment in non-core business and liquidity of SACCOs to be positively correlated. The study concluded that SACCOs in Kirinyaga County mostly capitalized on liquidity management and as such it affected the SACCOs’ liquidity. In addition, the study concluded that it was critical for SACCOs to have adequate liquidity in order to ensure that they meet short term maturing obligations. The study also concludes that cautious credit lending in SACCOs would result to helpfulness in liquidity of SACCOs. The study recommends that the SACCO management must put in place financial strategies to ensure that liquidity is effectively managed on a regular and timely basis and that appropriate policies and procedures are established to limit and control material sources of liquidity risk. It also recommends that SACCOs should also reconsider their loan recovery strategies and collateral for their loans and advances.