Asset Liquidity Risk Management and Financial Performance of Deposit Taking Savings and Credit Cooperatives in Kiambu County, Kenya

Abstract

The financial performance of deposit-taking SACCOs (DT-SACCOs) in Kenya has shown a sustained declining trend, even as their asset base and membership continue to expand. These SACCOs, which are key in mobilizing savings and providing credit to households and small enterprises, operate under the regulatory oversight of the Sacco Societies Regulatory Authority (SASRA). Despite this regulatory framework, their capacity to achieve consistent returns, uphold asset quality, and deliver stable value to members has remained constrained. The present study examined the influence of asset liquidity risk management on the financial performance of deposit taking savings and credit cooperative societies in Kiambu County, Kenya. The study was grounded on the liquidity preference theory and adopted a descriptive research design. The target population was the Deposit Taking Savings and Credit Cooperative Societies (DT-SACCOs) in Kiambu County, Kenya. As per the SASRA Report (2025), there are 13 DT-SACCOs in Kiambu County. Data was collected using a questionnaire and analyzed using descriptive methods that incorporated percentages, means, and standard deviations. Inferential analysis involved correlation and multiple regression analysis techniques. The analysis was conducted using SPSS version 25. Findings were presented using tables. The research findings established a positive and significant relationship between asset liquidity risk management and financial performance (r = 0.798, p = 0.000). As per the regression analysis results, the coefficient of determination (R² = 0.636) indicates that 63.6% of the variation in the financial performance of DT-SACCOs is explained by asset liquidity risk management. The study concludes that effective management of asset liquidity-related risks enhances the financial performance of deposit taking savings and credit cooperative societies by strengthening financial stability, improving resilience, and supporting sustainable operations. The study further concludes that sound liquidity planning, continuous monitoring, and timely response to potential challenges enable DT-SACCOs to meet their financial obligations and achieve better financial performance. It was recommended that DT-SACCOs strengthen their asset liquidity risk management through proactive planning, continuous assessment of liquidity exposures, and timely implementation of corrective measures to improve stability. The study also recommended that DT-SACCOs maintain prudent liquidity oversight to attain adequate financial performance.