Abstract:
The basic growth trend of SACCOs in Kenya start from non-deposit taking and gradually progress to deposit taking. This enables them to grow financially and expand their financial services offered to their members. However, closure of these SACCOs has been on the rise due to imprudent investment decisions made by unskilled staff that often leads to unmanageable loan portfolio and investment in pyramid schemes. This might be the reason for the 74 percent of farmers-based DT-SACCOs being illiquid. Thus, the general objective of the study seeks to assess the relationship between investment decisions and liquidity of farmers-based DT SACCOs. The specific research objectives are to determine the influence of lending decision, financial investment decision, research and development decision and human capital decision on liquidity of farmers-based deposit taking SACCOs. The study was anchored on modern portfolio theory and human capital theory. Descriptive cross-sectional survey research design was employed where the study population consisted of 49 finance managers and 49 credit managers of the 49 farmers-based DT SACCOs respectively. Further, the study utilized Yamane formula to determine the sample size where cluster sampling was employed to sample the DT SACCOS and simple random sampling were used to sample 78 out of 98 respondents. Reliability tests was considered and revealed that the data collection instruments were appropriate with cronchbach values between 0.761 and 0.813 whereas, Kaiser-Meyer-Olkin Measure of Sampling Adequacy index was above 0.5 and Bartlett’s test of Sphericity with P value less than 5 percent significance level thus appropriate for factor analysis. The study further analyzed data through multiple regression models. The regression models revealed that; lending decision, financial investment decision, research and development decision and human capital decision had a p-value of 0.000, 0.004, 0.014 and 0.005 revealing that there exists a significant nexus between predictor variables and liquidity of farmers-based DT-SACCOs. Moreover, the study found that; SACCO size strengthens the relationship between investment decision and liquidity of farmers-based DT SACCOs. Based on the findings, the study concluded that an increase in one unit of lending decision, financial investment decision, research and development decision and human capital decision improves liquidity of farmers-based DT-SACCOs. Thus, the study recommends SACCOs to desist from investments classified as other assets as they are deceitful activities which affect liquidity and at the same time expose members’ funds at risk of being lost. This was supported by study findings that investment in other assets had an inverse nexus on liquidity meaning that an increase in one unit of other assets leads to a decrease in liquidity
