Effects of credit policy on the liquidity of deposit taking saccos in Nairobi county
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Date
2016Author
Nyakado, Balbina A
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Liquidity is the ability of a financial institution or the ability of an organization to meet
its financial obligation as they fall due. Liquidity is an important aspect in a company
when achieving overall short and long terms financial objective while also maximizing
the owner’s wealth and protecting them against the dynamics in the market. In SACCOs
liquidity is important as lack of liquidity or liquid assets leads to bankruptcy as the
institution will not be able cover for its cash demands as they fall due. Therefore
managing liquidity is a top priority of deposit taking SACCOs. To manage liquidity
effectively a good understanding of the factors affecting liquidity is critical. The current
study wanted to find out the effect of credit policy on the liquidity alongside other factors
such as the size, capital, collection policy and the duration of loans. To facilitate this, a
research was done on deposit taking SACCOs operating within Nairobi. The data on the
liquidity, size and policies was collected from 38 SACCOs for the period between 2011
and 2015 and analyzed using descriptive statistics and inferential statistics such as
correlation and multiple linear regressions. The study found that credit policy, capital
adequacy and the size (assets) significantly affect the liquidity of the SACCOs while
duration of the loan and the collection policies had neither significant relationship nor
effect on liquidity. To effectively maintain favorable levels of liquidity, it was
recommended that financial institutions capitalize on review of credit policies and growth
of their firms to increase their Capital and assets to efficiently maintain an appropriate
level of liquidity. This would ensure that both short and long term financial obligations
are adequately met and operations of the SACCOs run smoothly.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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