Abstract: Liquidity risk is brought about by factors such as nature of the customer base and prevailing economic environment among others. The study sought to establish the effect of working capital on Liquidity risk management. It considered that though DT-SACCOs aimed at making profits and meeting needs of their members as they keep afloat by closely monitoring the working capital components which affect operations in the short run but can cause insolvency in the long run if not taken into consideration. The specific objective was to determine the effect of debtor’s payment period on liquidity risk management. An explanatory research design was adopted. The targeted population for the study constituted 40 DT-SACCOs in Nairobi County. Primary data was collected using structured questionnaires while secondary data was collected from audited financial reports of DT-SACCOs. Reliability was determined using Cronbach alpha and validity of the instruments by content validity. SPSS was used to analyze the data, descriptive statistics included percentage, frequency, mean and standard deviation. Inferential statistics included Pearson correlation and linear regression at significance level of 0.05. study established that management of working capital components affects liquidity risk in DT-SACCOs. Debtor’s payment period had negative significant relationship with liquidity risk management. As the DT-SACCOs determine length of the conversion cycle between the payables and receivables it should be lengthy enough to ensure that the DT-SACCOs are able to meet their obligations when they arise. This signifies that debtors payment period has an impact on liquidity risk management in the DT-SACCOs.
Keywords: Liquidity Risk Management, Debtors’ Payment Period, Working Capital, Deposit Taking SACCOs.
Title: The Effect of Working Capital on Liquidity Risk Management: A Case of Deposit Taking Savings and Credit Co-Operative Societies (DT-SACCOS) in Nairobi County- Kenya
Author: Masibili Rose Namikoye, Dr.Robert Odunga, Dr. Joel Chepkwony
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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