Cash management practices and financial performance of livestock marketing cooperative societies in Marsabit County, Kenya

Abstract

An objective evaluation of the performance of livestock cooperative societies is imperative in order to ascertain whether they fully reward members for the use of their equity fund. The evaluation of agricultural cooperatives using the conventional measures of financial performance like return on asset, return on equity, return on operating equity net margins on sales etc do no yield unequivocal results. Livestock marketing cooperatives societies in Marsabit County have continuously used these conventional measures giving mixed results but failing to indicate whether they create value for member producers. The objective of this study therefore sought to establish the effect of cash management practices on the performance of livestock marketing cooperative societies in Marsabit County. The key theories anchoring the study are; Keynesian theory of money, free cash flow theory and stakeholder theory. The current study adopted quantitative research design. The target population was twelve livestock marketing cooperative societies in Marsabit County that have been operational in the period 2019-2023. The unit of observation was the 110 employees in the finance departments. The study used stratified random sampling technique to arrive at a sample size of 86..  The study utilized both primary and secondary data where primary data was obtained from questionnaires that was presented to respondents and secondary data collection tool was used to obtain secondary data from audited financial reports accessible from society’s offices and ministry of cooperatives and micro-small and medium enterprises development. Diagnostic tests including multicollinearity test, normality test and reliability were conducted to confirm the model fitness. Data was analyzed using descriptive and  regression analysis. The regression results showed that periodic cash plan (p=0.003, <0.05), investing of surplus cash (p=0.19, <0.05), managing cash flows (p=0.00, <0.05) had positive statistically significant effect on financial performance. Bank credit line had positive effect on financial performance even though the change was not  significant.  The study therefore recommends that managers of Marsabit county livestock marketing cooperative societies should enhance effective use and preparation of cash budgets and consistent investment of surplus cash. Further, there should be more decentralization of receipts and application of accounting packages. For policy, the study recommends that policy makers and regulators should concentrate on creating regulations that will allow marketing societies to thrive through provision of appropriate infrastructure for wider market.