Liquidity Risk Management of Agricultural Cooperatives in Isabela, Philippines

Abstract

Purpose: The aim of this study is to examinethe liquidity risks the cooperative is exposed to, the effectiveness of liquidity risk management activities and the challenges faced by these selected agricultural cooperatives in Isabela in managing its liquidity risks. Theoretical framework: Cooperative development encompasses a wide range of individual and economic development issues. It is challenging for cooperatives of all sizes to control liquidity risk and assess the degree of uncertainty in their liquidity position. Since strategies for risk management are costly, cooperatives have had difficulties in reducing these liquidity risks, which might result in an increased rate of insolvency and pose problems for the financial condition of cooperatives. Design/Methodology/Approach: Data were gathered from 25 agricultural cooperatives located in the province of Isabela, Philippines through a four-point likert scale survey questionnaire, open and close-ended interview questionnaire and information from annual reports and financial statements. Quantitative data were analyzed using descriptive statistics. Findings: The results of the study revealed that agricultural cooperatives in Isabela are exposed to liquidity risk at low level. Numerous activities were implemented to minimize liquidity risk through liquidity risk identification, liquidity risk evaluation and liquidity risk mitigation. Moreover, cooperatives face various challenges in the implementation of risk management activities even though most of the cooperatives practice an effective liquidity risk management. Research, Practical & Social implications: The study will benefit the stakeholders of agricultural cooperatives in Isabela since cooperative operations are always evolving and liquidity risks are inherent in every organization. Originality/Value: The research examines agicultural cooperatives which is one of the organizations that provide assistance to the community. By producing liquidity risk management assessment, cooperatives will impove its operations and provide more support to its members.