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The Effect of Financial Management Practices on the Performance of Saccos in Hospitality Industry: A Case Study of Five Star Hotel Saccos in Nairobi

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dc.contributor.author Chege, Esther Muthoni
dc.date.accessioned 2016-07-01T09:04:46Z
dc.date.available 2016-07-01T09:04:46Z
dc.date.issued 2016
dc.identifier.uri http://erepo.usiu.ac.ke/11732/2558
dc.description Research project report submitted to the Chandaria School of Business in partial fulfillment of the requirement for the degree of Masters in Business Administration (MBA) en_US
dc.description.abstract The purpose of this study was to investigate the effect of financial management practices on the performance of SACCOs in the hospitality industry. The study was aimed at achieving three specific objectives; First, to evaluate the effect of cash management on the performance of SACCOs in hospitality industry; second, the effect of credit risk management on the performance of SACCOs in hospitality industry and lastly, to evaluate the effect of dividend policy on the performance of SACCOs in the hospitality industry. The study used descriptive research methodology. The target population was the 169 SACCO management committees from the 13 five star hotel SACCOs and a sample size 119 respondents was used. This study was guided by stratified random sampling technique and a structured questionnaire was used for data collection. The questionnaire was administered to the respondents through drop and pick method and once collected the data was analyzed using Microsoft Excel to calculate the frequency percentages, mean score as a measure of central tendency and standard deviation as a measure of data dispersion. Statistical Package for Social Science (SPSS) was used to perform correlation analysis that was used to establish the degree of relationship between respondents' opinion on the three research objectives. The findings were presented in tables and figures. The study found that majority of the SACCOs had adopted financial management practices that contribute to the performance of the SACCOs. Cash management policies have contributed to enhancing the liquidity of the SACCOs, ensuring loans are disbursed upon approval resulting to increase in profitability through the interest. The study also revealed that only a few SACCOs invested excess cash on marketable securities. The study found that most SACCOs have a credit management policy which is crucial in laying down guidelines and procedures on how to manage the variety of loan products offered by the SACCOs and minimize credit risk. Major findings also revealed that the SACCOs mainly used guarantee and members shareholding as securities to mitigate credit risk. vii The study concluded that SACCOs have an established dividend policy with an overwhelming majority using residual dividend policy and paid dividends annually. A large percentage of the respondents confirmed that SACCOs used previous year’s dividend, liquidity state of the SACCO, legal requirements and stability of earnings as determinants of dividend payable. The study also concluded that payment of dividends minimized agency cost and maximized shareholders which supported the agency theory. On the other hand, the study went against the Miller and Modigillian irrelevancy theory where a large percentage of the respondents disagreed that payment of the dividend is irrelevant. In the light of the findings the researcher recommends that in order to ensure the few SACCOs without financial management policies implement to protect the wealth of the members, the government and policy makers should implement policies that would extend incentives to SACCOs with good cash management skills in order to improve the service delivery of the SACCO. SACCOs should also create avenues to learn from each other which will help the SACCOs with poor financial management practices to acquire knowledge from the SACCOs that are excelling. Cash management systems should also be introduced to develop financial discipline. SACCOs should also extend securities to assets and collateral to protect the members who are also the guarantors. The researcher also recommended that SACCOs should be encouraged to retain earning in order to reinvest and increase the growth of the SACCOs which will lead to high profits in the future. The study also recommends that shareholders should also understand that, payment of dividends only marginally reflects good subsequent periods earning prospect, there are many other factors that influence future earnings including Sacco’s investment policy, operating environment and taxes. Thus they also need to pay attention to these factors when analyzing performance. SACCOs may therefore defer payment of dividends so as to increase profitability for the SACCO in order to have good dividend policy in future. en_US
dc.publisher United States International University - Africa en_US
dc.subject The Effect of Financial Management Practices on the Performance of Saccos in Hospitality Industry: A Case Study of Five Star Hotel Saccos in Nairobi en_US
dc.subject Financial Management en_US
dc.subject Hospitality en_US
dc.title The Effect of Financial Management Practices on the Performance of Saccos in Hospitality Industry: A Case Study of Five Star Hotel Saccos in Nairobi en_US
dc.type Thesis en_US


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