EFFECT OF LIQUIDITY MANAGEMENT ON FINANCIAL PERFORMANCE OF NON-DEPOSIT TAKING MICROFINANCE INSTITUTIONS IN MOMBASA, KENYA
Abstract
The purpose of the study was to investigate the effect of liquidity management on financial performance of non-deposit taking MFIs in Mombasa. The study specific objectives were to establish the effect of asset quality, capital adequacy, maturity gap and cash management on financial performance.. The study adopted cross-sectional descriptive survey research design. The target population of the study was seven non-deposit taking MFIs operating in Mombasa County. Unit of observation was 66 top managers and finance managers of the selected MFIs. The study utilized purposive sampling design and a sample of 58 respondents was selected by use of Fisher’s statistical formula. The study utilized primary data collected by use of structured closed-ended questionnaires. Pilot test was conducted on data collection tools to establish validity and reliability. On data analysis, descriptive statistics and inferential statistics was employed to analyze collected data. Statistical Package for Social Science (SPSS) was the data analysis tool. Analyzed data was presented by use of frequency and descriptive tables. The study results revealed that loan portfolio is the major revenue source for MFIs. The study established that the Microfinance institutions have invested in real assets to improve asset quality. The study concluded that the microfinance draws its funding from equity and external borrowing. Further, it was concluded that the microfinance had adequate total asset reserves to cover its financial needs and the microfinance capital base would be affected by loss of income-generating activities. The study recommended that the management of microfinance institutions should ensure liquidity is maintained to prevent potential loan issuance delays.
Key Words: Asset Quality, Capital Adequacy, Maturity Gap, Cash Management
CITATION: Shahale, D.M., & Ibrahim, A. A. (2022). Effect of liquidity management on financial performance of non-deposit taking microfinance institutions in Mombasa, Kenya. The Strategic Journal of Business & Change Management, 9 (2), 720 – 734.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i2.2294
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