Effect of liquidity management on the efficiency of savings and credit cooperative societies in Murang’a county
Liquidity and its proper management in financial institutions determine to great extent efficiency hence profitability of the firms. This study aimed at looking at how cash flows, prevailing accounting practices and membership characteristics influence efficiency of SACCOs in Murang’a County. It sought to answer the question, how does management of liquidity affect efficiency of SACCOs in Murang’a County. The study was based on liquidity preference theory, on stakeholders’ theory and on shift ability theory. The study adopted a descriptive survey design to access existing information related to the 43 Savings and Credit Cooperative Organizations that are in Murang’a County. Random sampling was used in arriving at 22 SACCOs that participated in the study. The study obtained secondary data in published financial statements. This came from SACCOs financial reports for the period 2012-2015. The study showed that cash flow is the most important aspect of liquidity management that can determine the efficiency of a SACCO. This is followed by the characteristics of members’ ship and finally accounting practices. This implies that for SACCOs to meet their obligations and those of their members, they should ensure that cash flow is predictable. They should also diversify their membership and include those able to save and take loans. The results also suggest that SACCOs should seek to recruit members that meet their growth aspirations since membership characteristics is an important aspect in their operations. The study suggests that dormant members should be activated or reduced for they don’t add value to liquidity management of SACCOs. This study has shed light on challenges faced by managers and board members of Savings and Credit Cooperatives in their efforts to enhance the efficiency of their SACCOs.