Cash management practices,firm size and financial sustainability of deposit-taking savings and credit co-operative societies in Kenya

Abstract

Deposit-taking Savings and Credit Co-operative Societies (DT-SACCOs) have been recognized globally as pivotal financial institutions that facilitate economic development and financial inclusion. Despite this significance, 35.55% of DT-SACCOs in Kenya have been reported as financially unsustainable, a condition attributed primarily to deficient cash management practices. On average, four Savings and Credit Co-operative Societies (SACCOs) are delicensed annually due to financial distress, raising substantive concerns regarding the sector's sustainability. This study was undertaken to investigate the extent to which firm size moderates the relationship between cash management practices and financial sustainability within Kenyan DT-SACCOs. Grounded in cash management theory, the research adopted a positivist paradigm and employed a cross-sectional survey design. A total of 176 finance managers representing 176 licensed DT-SACCOs constituted the study population. Using Yamane’s formula, a sample of 122 respondents was determined, with data collected through structured questionnaires yielding a 98% response rate. Descriptive and inferential statistical techniques were applied in the data analysis. A statistically significant positive relationship between cash management practices and financial sustainability was identified (p = 0.001). Moreover, an increase in the Nagelkerke R2 statistic indicated that firm size exerted a moderating effect on this relationship. It is recommended that DT-SACCOs prioritize the adoption of integrated digital treasury management systems to centralize and automate cash operations, including collections, disbursements, reconciliation, and liquidity monitoring, thereby enhancing financial resilience and long-term sustainability.