Liquidity, Financial Health and Financial Performance in Village Credit Union

Mirah Ayu Putri Trarintya

Abstract


This research aimed to measure the effect of liquidity and financial health to financial performance in microfinance institutions. Financial performance is the main indicator of financial sustainability in profit-oriented entity. Data of 94 village credit unions locally known as lembaga perkreditan desa (LPD) in Bali - Indonesia, over period of 2021 to 2023 was analysed using multiple linear regression. The result found that liquidity and financial health both have a positive impact on financial performance. Lower risk factor as the result of high liquidity and higher category of financial health shows improvement in financial performance. This finding contradicts values that higher loan distribution would lead to higher returns. This research has summarised key risk level in local microfinance institutions using financial health category measurement, just as CAMELS rating are used in commercial banks.  


Keywords


Liquidity, financial health, financial performance, financial performance, microfinance

Full Text:

PDF

References


Adam, M. H. M. (2014). Evaluating the Financial Performance of Banks using financial ratios-A case study of Erbil Bank for Investment and Finance. European Journal of Accounting Auditing and Finance Research, 2(6), 162-177.

Ahsan, M. K. (2016). Measuring financial performance based on CAMEL: A study on selected Islamic banks in Bangladesh. Asian Business Review, 6(1), 47-56.

Akenga, G. (2017). Effect of liquidity on financial performance of firms listed at the Nairobi Securities Exchange, Kenya. International journal of science and research, 6(7), 279-285.

Ariffin, N. M. (2012). Liquidity risk management and financial performance in Malaysia: empirical evidence from Islamic banks. Aceh International Journal of Social Science, 1(2).

Aspal, P. K., & Dhawan, S. (2016). Camels rating model for evaluating financial performance of banking sector: A theoretical perspective. International Journal of System Modeling and Simulation, 1(3), 10-15.

Bashatweh, A. D., & Ahmed, E. Y. (2020). Financial Performance Evaluation of the commercial banks in Jordan: Based on the CAMELS Framework. International Journal of Advanced Science and Technology, 29(5), 985-994.

Berger, A. N., & Bouwman, C. H. (2009). Bank liquidity creation. The review of financial studies, 22(9), 3779-3837.

Daryanto, W., Samidi, S., & Siregar, D. (2018). The impact of financial liquidity and leverage on financial performance: Evidence from property and real estate enterprises in Indonesia. Management Science Letters, 8(12), 1345-1352.

Demirgüneş, K. (2016). The effect of liquidity on financial performance: Evidence from Turkish retail industry. International journal of economics and finance, 8(4), 63-79.

Diamond, D. W., & Rajan, R. G. (2001). Liquidity risk, liquidity creation, and financial fragility: A theory of banking. Journal of political Economy, 109(2), 287-327.

Donaldson, L. (2006). The contingency theory of organizational design: challenges and opportunities. Organization Design: The evolving state-of-the-art, 19-40.

Islam, J., & Hu, H. (2012). A review of literature on contingency theory in managerial accounting. African journal of business management, 6(15), 5159-5164.

Maaka, Z. A. (2013). The relationship between liquidity risk and financial performance of commercial banks in Kenya (Doctoral dissertation, University of Nairobi).

Magoma, A., Mbwambo, H., Sallwa, A., & Mwasha, N. (2022). Financial Performance of Listed Commercial Banks in Tanzania: A CAMEL MODEL Approach. African journal of applied research, 8(1), 228-239.

Molyneux, P., Casu, B., & Girardone, C. (2006). Introduction to Banking. Prentice Hall Financial Times.

Muriithi, J. G., & Waweru, K. M. (2017). Liquidity risk and financial performance of commercial banks in Kenya. International Journal of Economics and Finance, 9(3), 256-265.

Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.

Rostami, M. (2015). Determination of Camels model on bank’s performance. International journal of multidisciplinary research and development, 2(10), 652-664.

Rudhani, L. H., & Balaj, D. (2019). The effect of liquidity risk on financial performance. Advances in Business-Related Scientific Research Journal, 10(2), 20-31.

Salim, B. F., & Bilal, Z. O. (2016). The impact of liquidity management on financial performance in Omani banking sector. International Journal of Accounting, Business and Economic Research, 14(1), 545-565.

Waswa, C. W., Mukras, M. S., & Oima, D. (2018). Effect of liquidity on financial performance of the Sugar Industry in Kenya. International Journal of Education and Research, 6(6).




DOI: https://doi.org/10.17509/jpak.v13i1.76091

Refbacks

  • There are currently no refbacks.


Creative Commons License

JPAK : Jurnal Pendidikan Akuntansi dan Keuangan  is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats