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Research Paper | Financial Engineering | Kenya | Volume 3 Issue 10, October 2014

Influence of Working Capital Management on Profitability of Non Deposit-Taking Microfinance Institutions in Kenya: A Survey of Non Deposit-Taking MFIs in Nakuru East Sub-County

Ndirangu Joyce | W. ^[172] | Wanyoike Daniel ^[8] | Kwasira Josphat ^[4]

Abstract: It is crucial for every firm to plan and control the current assets and current liabilities in a manner that eliminates the risk of its inability to meet due short-term obligations and also to avoid excessive investment in the aforementioned assets. The current study sought to establish the effect of working capital management on the profitability of non deposit-taking microfinance institutions in Kenya. It has been noted that non deposit-taking microfinance institutions (MFIs) play a vital role especially among low income earners. Against this backdrop, the aforementioned MFIs face numerous challenges touching on among others, working capital management (WCM). Moreover, it has been underscored that the implication of WCM on these MFIs is insufficiently researched. The independent variable was cash management while profitability of non deposit-taking MFIs constituted the dependent variable. The study took place among accounting/finance officers, credit officers, and management staff of non deposit-taking MFIs in Nakuru East Sub-County, Kenya. The study adopted descriptive survey research design. The study targeted a population of 63 staff members as outlined in the study scope. A census survey was employed implying that all the 63 members of the target population participated in the study. A structured questionnaire was used to collect data. A pilot study involving 7 members of the target population was conducted prior to the main study. The essence of the pilot study was to determine both the reliability and validity of the research instrument. The collected data was processed and analyzed by the aid of the Statistical Package for Social Sciences tool. Data analysis captured both descriptive and inferential statistics. The study findings were presented in tables of descriptive and inferential statistics. The findings indicated that, there exists a very strong, statistically significant and positive correlation between cash management and profitability of non deposit-taking MFIs in Nakuru East Sub-County. It was concluded that, enhancement of cash management would likely result in improved profitability of the non deposit-taking MFIs. It is recommended that, non deposit-taking MFIs ought to have adequate cash flow in order to ensure increased profitability.

Keywords: Cash conversion cycle, cash management, operating cycle, profitability, working capital, working capital management

Edition: Volume 3 Issue 10, October 2014,

Pages: 1750 - 1756

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