Liquidity risk management practices: The case of selected financial institutions in the Kumasi Metropolis
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Date
August, 2015
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Abstract
The study sought to examine the current liquidity risk management practices of selected financial institutions in the Kumasi metropolis; precisely Rural and Community Banks, Savings and Loans Companies and Microfinance Institutions. In all, 4 Rural and Community Banks, 4 Savings and Loans Companies, and 4 Microfinance Institutions (specifically, deposit-taking institutions), were chosen for the study, using a convenience sampling method. The key respondents, who on the other hand were the branch managers, operations and risk managers, were chosen purposively. Specifically, 3 respondents were selected from each institution, making a total of 36 respondents in all. Primary data were gathered using both questionnaires and interviews. The study revealed that internal control systems and institutional policies play a major role in the liquidity risk management practices of these institutions. Again, the setting of limits on savings withdrawals and the use of customers’ savings as a source of funding, were found to be the least used strategies across the three different groups of financial institutions (as a result of an increased competition in the banking sector). A further analysis of the results using a one-way ANOVA indicated that there were largely no significant differences in liquidity risk management practices across the three groups of institutions studied. Furthermore, the study revealed that a proper liquidity risk management had brought more benefits to the Rural and Community Banks than the Microfinance Institutions. Lastly, it was found that the Rural and Community Banks, as well as the Savings and Loans Companies were mostly affected by credit risk, whereas liquidity risk was a major risk for the Microfinance Institutions.
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A thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of
Master of Business Administration (Finance Option)