Cash-flow Management and the Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Kenya

Deposit-taking savings and credit co-operative societies (DT-SACCOs) are central to financial inclusion in Kenya, yet the sub-sector continues to record uneven financial performance amid tightening prudential supervision and recurrent liquidity stress. This study examined the effect of cash-flow management on the financial performance of DT-SACCOs in Kenya. The study was anchored on the Liquidity Preference Theory, the Baumol Model of Cash Management and the Transaction Cost Theory, and it adopted a pragmatism philosophy and a convergent mixed-methods design. The target population comprised the 176 licensed DT-SACCOs in Kenya, and a census of the 352 chief executive officers and chief finance officers of these societies was undertaken, complemented by in-depth interviews with twelve senior officers. A total of 259 usable questionnaires were returned, a response rate of 73.6 per cent. Quantitative data were analysed using descriptive statistics, Pearson correlation and simple linear regression, while qualitative data were analysed thematically. The findings showed that cash-flow management had a positive and statistically significant effect on financial performance (r = 0.512; β = 0.512; R² = 0.262; F(1, 257) = 91.31; p < .001), explaining 26.2 per cent of the variation in financial performance. The interview evidence revealed three themes, namely liquidity discipline, member confidence and the liquidity-lending trade-off, which together showed that senior officers manage liquidity as a balancing exercise rather than a maximisation problem. The study concludes that disciplined cash-flow management is a significant driver of DT-SACCO financial performance, operating within a bounded range beyond which excess liquidity imposes an opportunity cost. It recommends that DT-SACCOs codify their liquidity routines and frame liquidity policy as a managed corridor with documented upper and lower bounds.