Factors Affecting Liquidity Risk Management Practices in Microfinance Institutions in Kenya

Liquidity is a bank’s capacity to fund increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses. Liquidity risk is the inability of a bank to meet such obligations as they become due, without adversely affecting the bank’s financial condition. Sound liquidity management can reduce the probability of serious problems. The study adopted a survey research design. The target population included all the 128 employees from the 6 selected MFIs in Kenya. A sample of 96 employees were drawn and used in the study. Questionnaires were used to collect data from the field. The raw data collected was analyzed using the Statistical Program for Social Sciences (SPSS) Version 21.0. The hypotheses were tested using multiple regression analysis. The study found out that Micro Finance Institutions internal control systems, policies, Board oversight and risk monitoring significantly affects its liquidity risk management practices. The study recommended that established MFIs document their local strategies applied in liquidity risk management; effective internal control processes be introduced through implementation of computerized financial management systems; institutions should employ effective policies that impacts positively on the overall liquidity risk management functions; the Board should develop  initiatives to facilitate review of liquidity management framework and also provide strategic direction to the liquidity risk management function and the MFIs to maintain adequate information systems for measuring, monitoring, controlling and reporting on liquidity risks. Keywords: Liquidity Risk, Micro Finance Institutions, Board oversight and Institutional internal contro

Effect of Corporate Governance on Financial Performance of SACCOS in Kenya

This study sought to find out the effect of corporate governance on financial performance of savings and credit cooperatives.. The study looked at five theories related to corporate governance namely: agency theory, stakeholder theory, stewardship theory, simple finance model and the political model. It looked at work by others in Kenya, Uganda, Nigeria and Korea. There are 121 Sacco's in Nakuru, out of which there are fifty active Sacco's. The study did a survey of three Sacco's which have the majority of Sacco members. The study targeted all employees of the Sacco's. The study adopted a census method. They were availed to the respondents so that they could fill and return them. The study was carried out between May 2013 and December 2013. The study used Spearman’s rank correlation to analyze and present findings in tables showing percentages, frequency distribution, and also bar graphs, and pie charts. The study found out that there was a significant relationship between financial reporting and financial performance of savings and credit cooperatives. Sacco’s with more frequent financial reporting structures showed better financial performance. The study found out that there was a significant relationship between management style and financial performance of savings and credit cooperatives. Participative management with democratic leadership enhanced the financial performance of Sacco’s. The relationship between size of the board and financial performance was insignificant at 5% significance level. The study recommended that financial reporting should be done as frequently as possible, and management should use a leadership style that is most comfortable to employees and Sacco size should be kept where financial performance is least affected adversely. The study further recommended that studies should on corporate governance be carried out in other areas such as microfinance institutions, commercial banks and the financial sector as a whole