Liquidity Management Risks and Financial Performance of Tier-1 Savings and Credit Cooperatives (SACCOS) in Kenya
DOI:
https://doi.org/10.58857/JFAE.2026.v03.i01.p03Keywords:
Financial structure, Cash to deposit ratio, Loan to deposit ratio, Deposit to asset ratio, Financial performance, SACCOs, KenyaAbstract
This study empirically investigates the effect of financial structure variables—specifically, the cash to deposit ratio, deposits to total assets ratio, and loan to deposit ratio—on the financial performance of Savings and Credit Cooperative Organizations (SACCOs) in Kenya. The research utilized an explanatory design and implemented a quantitative panel data methodology including 30 SACCOs over a period of ten years. Data were examined utilizing Random-Effects Generalized Least Squares (GLS) regression, with model selection directed by the Hausman specification test. The regression analysis indicated that the three financial structure indicators had favorable and statistically significant effect on financial performance, as assessed by return on assets (ROA). Higher cash to deposit ratios improved the liquidity and solvency of SACCOs; increased deposit-to-asset ratios bolstered financial stability and resource mobilization; and effective loan-to-deposit ratios promoted credit intermediation and income generation. These findings highlight the significance of liquidity management, maximizing deposit mobilization, and fortifying lending techniques to improve SACCO sustainability. Policymakers and SACCO management are urged to closely observe these structural indicators while enacting reforms intended to enhance operational scale and modernize outdated institutions
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