The Liquidity-Financial Performance Nexus: Investigating the Role of Effective Liquidity Management in Microfinance Institutions in Bamenda, Cameroon

The idea of liquidity management is spreading throughout the world, especially in light of the current financial situation and the state of the global economy. In order to meet their responsibilities when they become due and to increase profitability and shareholder value, business owners and managers throughout the world are concerned about coming up with a plan for handling their daily operations. The main objective of this study is the effect of liquidity management on the financial performance of micro finance institutions in Bamenda. The study was also guided by the following specific objectives; to assess the effect of loan repayment on the financial performance of micro financial institutions in Bamenda-Cameroon, evaluate the effect of cash management on the performance of micro financial institutions in Bamenda-Cameroon, investigate the effect of capital adequacy on the financial performance of micro financial institutions in Bamenda-Cameroon. A total of eight category one MFIs were sampled for the study from where secondary panel data was collected from 2018 to 2022. The panel corrected standard errors along the lines of Beck and Katz was used to analyze the data given that some of the assumptions of OLS were violated. The results indicate that capital adequacy, cash management and loan repayment in terms of their magnitudes were respectively statistically significant on the financial performance of MFIs in Bamenda. It was therefore recommended that MFIs should incorporate new funding sources in their strategic plans, put in place cash management manuals and procedures which mainstream the insurance together with security component in managing cash. Above all, holistic loan collection policies and procedures should be upgraded by incorporating new challenges in loan management.