A Senior Essay Research Submitted to Department of Accounting and Finance for the partial fulfillment of the requirement of Bachelor of Art Degree in Accounting and Finance

Abstract

Liquidity creation is the main concerns of microfinance since it is crucial for its existence; hence the main purpose of the study was to trend and assess the liquidity practice of Microfinance institution. To deal with the problem, three fundamental research questions were formulated that stress on assess the effect financial performance on liquidity of microfinance institution the existence what the effect of non-earning liquid asset on liquidity of MFIs and how the level of deposit will affect liquidity in microfinance The data cover the period from (2007-2014) for 8years and used secondary data. To conduct the study, descriptive method was employed. The study involved secondary data collection of the return on assets, deposit to loan and nonliquid asset to measure trend of Microfinance during a specific year. The study found out that there is a negative relationship between liquidity with ROA & non liquid asset of microfinance. But positive relation with depositor. The study recommends that Incentives in the form of rewards for depositor should be strengthened depositor and need good management and also MFI must increase liquid asset than non-liquid asset