Microfinance Institutions In Kenya Research Articles

Fraud risk management and financial performance of microfinance institutions in Kenya

Fraud is a thorn in the flesh of many organizations in both local and global business ecosystems, more so in the financial sector because of the liquid nature of their services. To curb this menace, Financial Institutions including Microfinance institutions implemented fraud risk management practices. While larger financial institutions afford raft measures for curbing fraud, MFIs contend with less sophisticated practices in spite of them being the most susceptible to financial improprieties. Further, the determination of the overall effect of these practices on financial performance is critical in evaluating their success. The objective of this study therefore was to find out how fraud risk management practices affect the financial performance of Microfinance Institutions in Kenya. The study was anchored on the fraud management life cycle theory and focused on twelve deposit-taking Microfinance Institutions that were in operation in the Nairobi region of Kenya between 2016 to 2020. The study adopted a descriptive research design using cross-sectional data computed from the average financial results for five years 2016-2020. The study used purposive and stratified Random sampling methods to select a sample of 281 respondents from finance, ICT, operations, Audit, and Litigation managers and staff. The study used descriptive and inferential statistics to analyze the data. The results showed that fraud risk management positively and significantly affected financial performance by curbing incidents of fraud and concluded that to improve financial performance microfinance institutions should implement fraud risk management since they had a positive and significant effect on financial performance. The study recommended that firms should invest substantially in fraud risk management to reduce incidences of fraud and improve financial performance. Further, the management of Microfinance Institutions should continually evaluate and update their practices to keep abreast with the ever-changing fraud antics.

Relationship of Credit Risk and Profitability of Microfinance Institutions in Kenya

Microfinance institutions (MFIs) play a crucial role in offering financial services to marginalized and economically disadvantaged populations. However, these institutions face the challenge of credit risk, which has the potential to greatly impact their profitability and long-term viability. This study examined the relationship between credit risk and the financial performance of MFIs in Kenya. The study aims to investigate the connection between Capital Adequacy, Operational Efficiency, Interest Rate Spread, and the profitability of microfinance institutions in Kenya. The research utilizes a comprehensive dataset from 14 licensed and regulated MFIs in Kenya, covering the period from 2020 to 2022.The study utilized a research design based on census data. Secondary data was utilized. The Study examines the previous financial reports to find secondary data on performance. The data collected underwent analysis using both descriptive and inferential statistical tools. Given that the current study focused on the relationship study, a regression model was used as the analysis tool. The results obtained were then presented in the form of tables. The results of this study will benefit policy makers, managers, administrators, entrepreneurs, researchers, consultants, scholars, and trainers involved in strategic Microfinance Institutions. Results from the analysis suggest that the Kenyan microfinance sector encountered significant financial difficulties in the past. The profitability metrics, specifically return on assets (ROA) and return on equity (ROE), showed negative mean values of -8.89% and -8.72%, respectively. Based on the findings, it appears that MFIs incurred losses, as their assets and equity were not fully utilized. The study also discovered There is a strong positive relationship between Capital Adequacy and Operational Efficiency, as indicated by a correlation coefficient of 0.811. When Capital Adequacy increases, Operational Efficiency also increases, The correlation was highly significant, indicating a robust relationship. However, it is worth noting that there is a strong positive relationship between Capital Adequacy and Profitability Metrics, as indicated by a correlation coefficient of 0.961. Capital Adequacy has improved, leading to a significant increase in Profitability Metrics. The relationship between Operational Efficiency and Profitability Metrics was found to be highly positive, with a correlation coefficient of 0.875. The correlation between improved operational efficiency and higher profitability metrics is incredibly important. The relationship between Interest Rate Spread and Profitability Metrics has shown a strong positive correlation, with a correlation coefficient of 0.943. The profitability metrics were greatly impacted by the increased interest rate spread. The study found that it is recommended for Microfinance institutions in Kenya to diversify their income streams and give priority to improving credit risk management practices in order to effectively navigate the complexities of the sector. Additional research is needed to understand the factors that influence credit risk and profitability in the microfinance sector in Kenya.

Credit Risk Management on Financial Performance of Selected Microfinance Institutions

The purpose of this study was to look at the impact of credit risk management on the financial performance of a few Kenyan microfinance firms. The study's approach was a descriptive survey research design and a panel data analysis technique. The study comprised credit managers from all 52 Kenyan microfinance institutions registered in the Association of Microfinance Institutions in Kenya (AMFI) database. The study included all of the institutions that were targeted. The questionnaire, which had previously been tested on local microfinance banks in Kakamega County, was used to collect data. Data analysis included regression analysis and correlation. Throughout the data collection process, the researcher observed integrity. Tables were used to present the study's findings. According to the model summary, credit risk management accounts for 49.1% of the variance in the financial performance of Kenyan MFIs, while other factors not included in the study model account for the remaining 50.9%. With a p-value of 0.01 that is statistically significant. Multiple linear regression analysis revealed that a one-unit change in credit risk management resulted in a significant improvement of 0.672 units in microfinance institution performance (= 0.672 (0.087); at p.01). The study found that prudent and effective credit risk management boosts net profit margins, return on capital invested, and cash flow. The study adds to existing theories by emphasizing the importance of credit risk management in microfinance, lays the groundwork for future research, and advises Kenyan microfinance organizations to invest in efficient credit risk management to improve their financial performance. The report also suggests that studies on Savings and Credit Cooperative Societies (SACCOs) be conducted to compare study findings and that the Association of Microfinance Institutions do studies on non-registered microfinance across the country.

Strategic positioning and is it a useful construct in improving performance of microfinance institutions in Kenya

This paper aims to examine the effect of strategic leadership, resource allocation, information technology, customer focus, and differentiation on the performance of microfinance institutions in Nairobi City County. The study was founded on a resource-based view, dynamic capability and life-cycle theories. A target of 300 employees was targeted from which a sample of 172 research participants was recruited. The sample was selected through a combination of both stratified and sampling techniques. Questionnaires were used for primary data collection. Analysis used both descriptive and multiple regression analyses. The findings of the study indicated the urgency for microfinance organizations to adopt growth strategies that encompass innovative digital advancements, the introduction of novel products, innovation-focused strategies, and the digitization of services. The findings further highlighted the pivotal roles played by strategic positioning, strategic leadership, information technology integration, and differentiation in significantly shaping microfinance institutions’ performance. The findings also indicated that a unit enhancement of strategic positioning indicator had a significant enhancement on their individual performance. However, the effect of customer focus and resource allocation did not exhibit the same level of significance. The study recommended the reinforcement of strategic positioning, optimized resource allocation, embracing technological integration, and an unwavering focus on customer needs. The study recommended the exploration of diverse leadership styles, resource allocation strategies, and the undertaking of comparative analyses to draw insights into the effects of these factors on microfinance institutions.

Influence of Capital Risk on Financial Performance of Microfinance Institutions in Kenya

Microfinance Institutions (MFIs) services and activities in Kenya have helped the country reduce its poverty rate, but the country is still among the poorest in the world. Microfinance institutions in Kenya have also reported capital risk in terms of pricing since they have less flexibility to adjust prices due to their financial structure. The main objective of the study is to establish the influence of capital risk on the financial performance of microfinance institutions in Kenya. The study used a descriptive survey research design with a target population of 12 MFIs listed under the Central Bank of Kenya (CBK). The study used a census approach to sample the entire population. The study used secondary data from published CBK reports over a 7-year period from 2015 to 2021. Descriptive statistics are comprised of skewness, kurtosis, and jarque bera. Inferential statistics used were Pearson correlation and hierarchical regression. A study on financial risk factors and financial performance may be of value to the government in policy formation. The microfinance act policy formulators can use the study to ascertain contagious issues that need to be addressed, especially how to handle capital risk challenges. The study may assist the management of microfinance institutions in establishing the problems facing financial risk factors in their sector. Capital risk had a significant positive effect on the financial performance of the Nairobi Securities Exchange in Kenya (t =0.0346763, p<0.05). This model produced an R square of 0.378, implying that 3.78% of the variation in the risks of microfinance institutions is significantly affected by capital risk. Regarding microfinance size, the incorporation of IV*MV, thus interaction terms, moved R squared from 0.337 to 0.378, hence an increase of 0.041. The P value of 0.024 and an R squared increase of 0.041 shows that microfinance size has a moderatingly significant effect on the relationship between capital risk and the financial performance of microfinance institutions. The study rejected the null hypothesis. The findings guided the following recommendations: It was found that capital risk has a significant impact on financial performance; hence, microfinance firms should improve their assets so as to minimize the risks associated with their capital base.

Capital Structure and Financial Performance of Micro-Finance Institutions in Kenya

Purpose: This research was envisioned to assess the influence of the capital structure on ROE of Micro-financial institutions in Kenya. The research was in search for resolving the following problem; is there a connection between the composition of capital (loan, shareholder’s equity, retained earnings and deposits) and the viability of MFIs? If the firm size has an influence on ROE? The study was motivated by the following capital structure theories, which are the theory of pecking order, Trade-off theory and the theory of Marketing timing.
 Methodology: To define the independent variable, the researcher used a correlation research design. The target demographic of the research was all 14 successful microfinance companies as recognized by the Kenya Microfinance Act as of 2020. The research therefore represented a census survey with a period of 5 years (from 2016-2020). The study's research model consisted of the independent variable loans, shareholder’s equity, retained earnings and deposits and the size of the firm as a moderating variable, determined by the firm’s total asset value, and the following ratios as dependent variables: return on equity. To analyze the results, EViews was used. There was descriptive and inferential statistics execution. Diagnostic results were computed before the data analysis.
 Findings: The results were presented in the form of tables. The inferential statistics with the moderating variable revealed that loan financing has statistical negligible sway on the financial return of MFIs (p=0.9832>0.05). Shareholders equity financing was found to have a statistically significant influence on financial performance of MFIs (p=0.0047<0.05). Retained earnings financing was found to have a statistically significant influence on financial performance of MFIs (p=0.0016<0.05). Deposit financing was found to have a statistically insignificant influence on financial performance of MFIs (p=0.2168>0.05).in this study.
 Unique contribution to theory, practice and policy: The study suggested that MFIs should strike a balance benefits and costs of debt arising thereof in line with the Trade-off theory, fast growing MFIs to utilize more retained earnings in capital structure, more profitable businesses use less shareholder’s equity in capital structure mix and finally positive correlation on deposits indicating similar correlation is likely to exist with financing capital structure. Thus MFIs may consider reviewing these measures so as to enhance performance to serve the low-income earners better in improving the economy. Further studies can be done based on other performance measures like ROA, EPS,Net Interest Margin. The study used a correlation research design for five-year period from 2016 to 2020. Therefore, this study can be replicated using a different methodology and covering a longer period like ten year.

Effect of Credit Monitoring Practices on Loan Nonperformance among Microfinance Institutions in Nairobi County, Kenya

The Kenyan microfinance industry faces many challenges. Studies point to nonperforming loans as one of the main problems facing microfinance institutions in Kenya, which has led to reduced profitability and institutional collapse in some cases. Noncompliance with credit monitoring and loan policy provisions have been cited as some of the factors leading to increased non-performing loans. The main objective was to determine the effect of Credit Monitoring on nonperforming loans among microfinance institutions in Nairobi County. Information Asymmetry theory guided the study. The study’s main goal was to assess how credit management methods in Nairobi County’s microfinance institutions influence the amount of non-performing loans. The study employed correlation research design where a quantitative approach was adopted. Stratified proportionate random sampling was adopted where data was obtained from 48 microfinance institutions in Nairobi County. The population constituted 192 respondents comprising general managers, credit managers, finance officers, and accountants. The study sampled 128 staff who responded to questionnaires designed on a 5-point Likert scale. Data were subjected to analysis by use of SPSS, where correlation demonstrated possible relationships of variables while regression predicted the effects of changing variables on the defaulted loans. The study found that there was a positive significant effect of credit monitoring practice (β=-0.498, t=-5.099, p< 0.05). The null hypotheses were rejected and alternative hypotheses were accepted that credit monitoring practice had a significant influence on loan nonperformance among microfinance entities in Nairobi County, Kenya. Based on the findings of the study, the researcher recommends that microfinance entities should strengthen credit-monitoring practices to minimize debt writing off and loan nonperformance.

Portfolio Diversification and Financial Performance of Microfinance Institutions in Nairobi County, Kenya

Purpose: The current study sought to establish the effect of portfolio diversification on financial performance of microfinance institutions in Kenya. The study focused on establishing the effects of asset class diversification, risk profiling diversification, income diversification and locational diversification on performance of microfinance institutions in Kenya. The study was supported by Shiftability Theory, Capital Market Theory, Resource Based Theory and Balanced Score Card Theory. 
 Methodology: A descriptive research design was used and targeted 57 micro finance institutions operating in Nairobi County and registered under Association of Micro Finance Institutions. The unit of observation comprised of employees in top level management including chief financial officer, operational manager, and chief manager making a total of 171 respondents. The study employed a census approach. Both primary and secondary data were utilized in the study. Primary data was gathered using a five point Likert scale questionnaire while a secondary data collection sheet was utilized to collect secondary data from financial reports of the respective institutions. Both descriptive and inferential statistics was used to analyze the collected data. The statistics were generated through Statistical Package for Social Scientists and MS Excel.
 Findings: The results were displayed in form of tables. The study established that portfolio diversification comprising of asset class, risk profiling, and income diversification positively and significantly affect financial performance of the MFIs operating in Nairobi County as shown by respective beta values of 0.318, 0.288 and 0.498 and significant values of 0.000, 0.005 and 0.000. This bears the implications that enhancing aspects of each of the portfolio diversification contributes to improved financial performance of the institutions. Locational diversification on the other had had a positive but insignificant effect on financial performance of the MFIs (beta=0.103, sig=0.000>0.05) which implies that enhancing aspects of locational diversification contributes insignificantly to financial performance of the MFIs.
 Unique contribution to theory, practice and policy: The study provided recommendations to the management of the MFIs to enhance the levels of asset class diversification, risk profiling diversification, and income diversification since the practices bears positive and significant effect on financial performances of the MFIs.

The Influence Electronic Loan Management System on Loan Performance Amongst Microfinance Institutions in Kenya

This study sought to determine the influence of electronic loan management system on performance of loans in microfinance institutions in Kenya with specificity of Nairobi County where the survey was conducted on microfinance institutions in Nairobi. The study was based on three main variables which included credit scoring system, loan monitoring and credit recovery processes. The study was based on Transactions Cost Innovative Theory. Descriptive research design was employed in the study. Census used because the population was manageable. Regression coefficient from revealed that a unit increase in electronic loan management system would results to a significant increase in Loan performance amongst microfinance institutions in Kenya. Keywords: Electronic loan management system, Microfinance institution, Loan performance. DOI: 10.7176/RJFA/14-10-07 Publication date: May 31 st 2023

Influence of Self Efficacy on Employee Acceptance Levels and Use of Human Resource Analytics in Microfinance Institutions in Kenya

Employees influence company performance the most. Through the use of human resource analytics, they become more efficient and therefore ensuring that organizations improve their competitiveness. However, the diffusion of this concept among employees in organization has been slow. The purpose of this study was to establish the influence of self-efficacy on employee acceptance levels of human resource analytics in Microfinance institutions in Kenya. It was based on diffusion of innovation theory and theory of reasoned action. A cross-sectional survey was done of 500 employees. Stratified random and purposive sampling techniques were used to obtain a sample of 222 respondents. The study established that employees with high self-efficacy accept and use human resource analytics more. This enables computing of people value and contributions to organizations. Regression results showed that self-efficacy has a statistically significant positive effect on employee acceptance levels and use of human resource analytics (β = 0.879, p = 0.000, R=0.740, p = 0.000). The study recommends that employees nurture their affective state and enactive mastery towards using analytics. This shapes their behavioral intent in accepting and using human resource analytics hence making proactive decisions. Organizations should provide training to build on employees’ confidence in analytical capability.

Budgetary Controls and Financial Performance of Micro Finance Institutions (MFIs) in Kenya

Micro financing institutions in Kenya showed a high growth rate since they were established in 1997 and legislation passed in 2006 with the micro finance Act which became active in 2008. The research sought to determine exactly how budget controls influence financial performance of micro finance organizations (MFIs) in Kenya. The objectives of the study were to establish the effect of budget planning on the performance of MFIs; to figure out the impact of budget control on the performance of MFIs in Kenya; to establish the impact of budget plan analysis on the economic efficiency of MFIs and to assess the impact of budget coverage on the financial performance of MFIs in Kenya. The research study was anchored on the Priority Based Budgeting Theory, Goal-setting theory as well as the Accountancy theory. The study adopted the descriptive research design. The target population was 713 employees of the 14 MFIs in Kenya. Purposive sampling was adopted to select a sample size of 70 top and mid-level managers. Data was obtained via structured questionnaires as well as an interview schedule. Descriptive and inferential statistics were used to analyze the data with the help of SPSS. The study used a multiple regression model to show the relationship between the study variables. The findings revealed an R squared of 0.872 which means that the independent variables contribute up to 87.2% of the changes in the dependent variable and adjusted R squared of 0.864 at 95% significance level, implying that the budgetary controls adopted in this study (Reporting, Planning, Evaluation, Coordination) jointly explained 87.2 percent of the variation in performance of the MFIs in Kenya. The study also found that budget planning as an aspect of budgetary control had a positive and significant effect on the performance of MFIs in Kenya (β =105, p=.016<.05), budget coordination as an aspect of budgetary control had a positive and significant effect on the performance of MFIs in Kenya (β =.162, p=.005<.05), budget evaluation as an aspect of budgetary control had a positive and significant effect on the performance of MFIs in Kenya (β =.240, p=.005<.05), and finally that budget reporting had a positive and significant effect on the performance of MFIs in Kenya (β =.398, p=.000<.05). The study concluded that budgetary control practices adopted had positive and significant effect on the performance of MFIs in Kenya. The study thus recommended that recommends that the microfinance institutions should consider enhancing the budgetary control measures such as budget planning, budget coordination, budget evaluation and budget reporting as ways of enhancing their performance. Keywords: Budgetary Controls, Financial Performance, Microfinance Institutions

Corporate Governance Practices and Organization Performance Among Deposit Taking Microfinance Institutions in Nairobi County, Kenya

The purpose of this study was to assess the influence of corporate governance practices on organizational performance of Deposit Taking Microfinance Institutions in Kenya. The following specific objectives guided the research: to assess the impact of the corporate governance documentation, corporate governance framework, corporate governance policies and corporate governance reporting on the performance of Deposit Taking Microfinance Institutions in Nairobi County, Kenya. The study also investigated the moderating effect of corporate culture on the relationship between corporate governance practices and performance of DMFIs. A descriptive research design was employed to fulfill the study's objectives. All 13 registered Deposit Taking Microfinance Institutions in Kenya were included in the study's population. Primary and secondary data were used in the study. Measures of tendency such as means, frequencies, and standard deviations were used in data analysis. Tables and figures were be used to show the study's findings. From the correlation analysis, the study found out that all the variables including corporate governance documentation, corporate governance framework, corporate governance policies, corporate governance and corporate culture had a positive significant effect on the performance of the deposit taking microfinance institutions in Nairobi county (p<0.01). This was supported from the regression analysis where the corporate governance practices studied were found to explain 74.5% of the variations in performance of the deposit taking microfinance institutions in Nairobi county (R2=0.745). This confirms a strong positive relationship between CG practices and performance. The moderated regression analysis model further showed that 76.2% of performance of the DTMFIs can be accounted for by the independent variables when corporate culture was moderating the relationship (Δ Adjusted R2=0.017). The study therefore concludes that appropriate formulation and implementation of these CG practices as per each firms’ requirements is critical in ensuring improved organizational performance. The study also concludes that the type of corporate culture in an organization not only affect the type of corporate governance practices that are adopted by a particular firm, but also the resulting effect of organizational operations and organizational performance accrued in the long run. The study recommends that financial corporate reports must now contain more information due to the increased complexity of business, as investors rely on corporate information when making investment decisions. The study recommends that firms should adopt diverse board duties, share information with employees to ensure that they are committed to corporate governance principles, and give crucial information to shareholders through disclosure of information, particularly financial reports. The study also recommends that current organizational principles shouldn't interfere with their work, and the organizational culture should promote organizational performance. Further, the study also recommends that in order to ensure sound corporate governance across all industries, the policymakers take the appropriate actions.

Financing Practices on Sustainability of Microfinance Institutions in Nakuru County, Kenya

The study aimed at financing practices on the sustainability of microfinance institutions in Nakuru County. A Census of microfinance institutions in Nakuru County was carried out. The objectives of this research were: To establish the effect of group financing on the sustainability of microfinance institutions in Nakuru County; to evaluate the effect of debt financing on the sustainability of Microfinance in Nakuru County, To evaluate the effect of financial securities on the sustainability of microfinance institutions in Nakuru County, and To determine the effect of loan performance on the financial sustainability of Microfinance institutions in Nakuru County It analyzed how financing practices lead to the sustainability of microfinance institutions in the county. A sampling design was used because it is the most efficient for this kind of study. The target population was the microfinance institutions that practice financing services and lead to the sustainability of Microfinance institutions in Kenya. The research study used judgmental sampling because the population under study was large, and the sample size was Finance respondents in 5 registered Microfinance institutions in Nakuru County in Kenya. The data collection instruments were questionnaires for the respondents to fill in primary data and micro-financial reports, including published financial statements in collecting secondary data. The coded data were entered into the Statistical Package for Social Sciences (SPSS) Version 24 analytical tool for analysis. Descriptive statistics were done using mean, percentages, and standard deviation. Inferential statistics involved correlation and regression. Correlation results showed a weak to moderate relationship between the independent and dependent variables. The study thus recommends that the MFIs consider and improve group financing, debt financing, financial securities, and loan performance to increase their sustainability. The findings of the study are essential for policymakers and institutions, especially those in the microfinance industry, to develop a policy framework that will take care of issues like improving service delivery to end users by microfinance institutions in Kenya.

Influence of performance expectancy on individual adoption levels of human resource analytics among human resource professionals in microfinance institutions in Kenya

Performance expectancy is when individuals believe an innovation supports their performance. Myriad challenges facing organizations have forced them to innovate to remain competitive. Human resource analytics is one such innovation which measures human resource functions for purposeful alignment with the organizations’ objectives. Earlier studies showed that 71% of respondents regarded human resource analytics as key. However, other studies found out that the uptake of human resource analytics was slow. The purpose of this study was to establish the influence of performance expectancy on individual adoption levels of human resource analytics among human resource professionals in Microfinance institutions in Kenya. The study was conducted in registered deposit taking Microfinance Institutions in Kenya. A cross-sectional survey was done on 500 human resource professionals. Stratified random and purposive sampling methods were used, obtaining a sample of 222 respondents. Questionnaires were used to collect data. The findings revealed that using human resource analytics improves job efficiency, making human resource professionals strategic. The study concludes there is a significant positive correlation (R = 0.754, p = 0.00) between performance expectancy and individual adoption levels of human resource analytics and that performance expectancy has positive significant effect on adoption levels (β = 0.855, p = 0.000). The study recommends that organizations align data analytical tools with management systems and also train its employees to increase the perceived usefulness of human resource analytics hence aiding with adoption.

Effect of Product Innovations on Growth of Micr Ofinance Institutions in Narok Town

Innovations enhance long and short-term decisions making towards remaining competitive in the business environment. MFIs in Kenya and more so in Narok Town are no exception. The study sought to assess the effect of product innovation strategies on the growth of microfinance institutions in Kenya, Narok Town. The research adopted cross-sectional design and a census was applied of 180 respondents employed in 11 registered MFIs. Primary and Secondary data was collected and correlation and linear regression analyses were applied. The results showed that product innovation had a significant positive association to growth of MFIs in Narok Town (r= 0.190, p=0.019), and product innovation had a positive Statistical effect on growth of MFIs in Narok Town (?=0.169, t (149) = 2.35,p=0.02<0.05). In conclusion, it is evident that the more MFIs invest in innovative products the better their growth. The study therefore, recommends that the MFIs in Narok town need to invest more in product innovation as a mean to sustain their growth and remain afloat in the completive market.

The Mediating Effect of Psychological Empowerment on the Relationship between Transformational Leadership and Staff Retention in Microfinance Institutions in Kenya

Retention of the desired staff in microfinance institutions has remained a major challenge as depicted from extant literature. It is often associated with inappropriate leadership deployed in these institutions among other antecedents. The current study, therefore, set out to establish the effect of transformational leadership on staff retention in microfinance institutions in Nairobi City County, Kenya, as well as the mediating effect psychological empowerment on the relationship between transformational leadership and staff retention in microfinance institutions in Nairobi City County, Kenya. The study was guided by Transformational Leadership Theory, Leader-Member Exchange Theory, Social Exchange Theory, and Resource-Based View Theory and founded on the positivism philosophy. Descriptive and explanatory research designs were adopted to guide the study. A sample of 298 respondents was obtained from 12 microfinance institutions in the Nairobi City County, Kenya, through census method for data collection. The unit of analysis was the head offices of the 12 microfinance institutions, while the unit of observation was the senior management level, middle management level and lower management level. Data was collected using structured questionnaires and analysed using descriptive and inferential statistics. The hypotheses were tested at the 5% significance level. The study established that transformational leadership was a significant predictor of staff retention, and that this relationship was partially mediated by the psychological empowerment. The study recommends that the microfinance institutions management should align transformational leadership practices with the strategic goals set for staff retention and emphasize on psychologically empowering strategies for their staff.

An Empirical Survey of the Relationship between Transformational Leadership and Staff Retention in the Context of Microfinance Institutions in Kenya

Retention of the desired staff is a key determinant of success in microfinance institutions in the modern competitive world. Notably, these institutions experience poor staff retention due to inappropriate leadership. Investigations on the effect of transformational leadership on staff retention have largely considered transformational leadership as a unidimensional construct than its respective dimensions of idealized influence, inspirational motivation, intellectual stimulation and individualized consideration. This study therefore investigated the effect of transformational leadership on staff retention in microfinance institutions in Nairobi City County, Kenya, specifically the effect of idealized influence, inspirational motivation, intellectual stimulation and individual consideration on staff retention. The underpinning theories were Transformational Leadership Theory, Leader-Member Exchange Theory, Social Exchange Theory, and Resource-Based View Theory. The study was guided by the positivism philosophy and descriptive and explanatory research designs. A total of 298 respondents was obtained through census sampling from the 12 accessible microfinance institutions licenced by the Central Bank of Kenya in Nairobi City County. Primary data was collected from senior, middle and lower-level management staff in the headquarters of these institutions, using structured questionnaires. The data were analysed using descriptive and inferential statistics, while hypotheses were tested at 5% significance level using regression analysis. The study established that transformational leadership significantly predicts staff retention through idealized influence, intellectual stimulation and individualized consideration. The study recommends that the policy makers in the microfinance institutions should align transformational leadership practices with the staff retention strategies for the success of these institutions.

Undoing Performance in Micro Finance Institutions: Reflections on Regulatory Framework in Kenya

The performance of Micro Finance Institutions (MFIs) has been affected negatively by the current hypercompetitive economic environment which has beencharacterised by as unfair competition. Huge losses have been reported among MFIs in Kenya, this has forced MFIs to innovate differently; product, financial, organisational or market innovation. This has not yielded better results. The study sought to establish the moderating effect of the regulatory framework on the relationship between strategic innovation orientation and performance of MFIs using the case of Kenya. The indicators for the regulatory framework were; prudential guidelines, non-prudential guidelines, and government laws. A descriptive and explanatory research design was adopted as the research design with a target population of 13 MFIs from which a sample of 352 respondents was obtained using a proportionate stratified and simple random sampling technique. Both financial and non-financial measures of performance were collected and analysed using mutiple regression. The regulatory framework was found to have a moderating effect on the relationship between strategic innovation orientation and performance. The findings established that regulatory framework had a moderating effect on the relationship between strategic innovation orientation and performance of MFIs. This informs the importance of regulation and control by regulatory bodies and the government.

Employee Engagement and Performance in Microfinance Institutions in Kenya: A Case of BIMAS Kenya Limited

This study’s main aim was to explore the connection existing between engagement and performance of employees in microfinance institutions in Kenya with BIMAS Kenya Limited as a case study. To achieve this objective, the study’s sought to establish the effect of Empowerment on performance and to examine the moderating effect of industrial regulations on the relationship between employee engagement and performance of employees at BIMAS Kenya Limited. The study was principally anchored on the Three component model of engagement, the Universalistic theory and the Herzberg two factor theory. A descriptive research design was used and the respondents were 48 employees who are Top level managers, Operations managers and Branch managers. A census was carried out since the population of the study was relatively small. Primary data collection was done using structured questionnaires that comprised both open and closed ended questions. A pilot study was employed to help in identifying problems that could be encountered by the respondents. Content validity was used and testing of instrument reliability was done using the Cronbach Alpha with a threshold of 0.7. Descriptive analyses was analyzed using frequencies and percentages, means and standard deviations. While inferential statistics was analyzed using multiple linear regression using 0.05 level of significance. SPSS version 24 software aided in data analysis. The analyzed quantitative data findings were presented by the use of frequency tables, bar charts and pie charts. The study findings revealed that there is minimal bureaucracy in the organization and that they had the necessary skills to perform their duties. The employees, identified with the organizational goals and wanted to serve for long. On regression, the model summary ascertained that the model is good and can be utilized for the purposes of estimation. The F critical at 5% level of significance was 3.123. Since F calculated is greater than the F critical (value = 25.185), this shows that the overall model was significant. This study recommends that managers should ensure all their employees have everything they require to perform their duties, be treated equally and adopt the use of different strategies to ensure that the output of employees is utilized to the maximum. The study recommends further research to understand how an employee is empowered.

Horticultural financing lending policies on performance of financing institutions in Kenya

Horticultural financing has a large effect on performance of financial institutions in Kenya. The lending policies adopted by a financial institution affect the volume of loan applications that a lending institution attracts. Financial institutions’ horticultural financing lending policies hamper access to horticulture products loans that increase output by improving farming practices. This research was therefore designed to investigate the horticultural lending policies and performance of financial institutions in Kenya. It is on this premise that the researcher sought to establish whether horticultural lending policies affect financial institutions performance in Kenya. The target population of this study was 54 financial institutions comprising 41 commercial banks and 13 registered Microfinance Institutions in Kenya. The study adopted a descriptive cross-sectional survey was adopted. Data was collected through a survey using self-administered questionnaires administered to the heads of credit and credit line managers of the various financial institutions. The data was analyzed using descriptive and inferential statistics. The findings revealed that horticultural financing lending policies positively and significantly (P-Value, 0.00) affect the performance of financial institutions in Kenya. From the findings, lending policies was positively related to the performance of financial institutions in Kenya.