Strategic Response and Performance of Microfinance Institutions in Nairobi City County, Kenya

Abstract

Majority of Micro finance institutions in Kenya have made losses since the first institution was licensed by the Central Bank of Kenya in 2009. Despite the fact that prudential regulations have been in place to help the CBK regulates MFIs, the problem of capital and liquidity requirements as well as increase in non-performing loans have continued to be on the increase. Therefore, this study sought to investigate the influence of strategic response on the performance of microfinance institutions in Nairobi City County, Kenya. The study was guided by Resource Based View Theory, Structural Contingency Theory, Ansoff Matrix and Human Capital Theory. This study employed a descriptive research design. The target population for this study was 13 Micro finance institutions in Nairobi City County, Kenya. The total number of respondents was 833 employees working with the 13 micro finance institutions. To ensure that all cases are represented, respondents were classified by the organizations they work with using a stratified sampling method. A simple random selection method was utilized in selecting the respondents. The study had a sample size of 270 respondents. The study used primary data that was collected using questionnaires. Questionnaires were piloted to 27 respondents working with momentum credit limited in Nairobi County, Kenya. The validity of research instrument was tested using in content, criterion and construct validity. Cronbach’s alpha reliability coefficient was used to test the reliability of the questionnaire. Qualitative data was analysed using content analysis technique and presented in narrative form. Quantitative data was analyzed using descriptive statistics such as mean and standard deviation. The study further carried out inferential statistics that included correlation analysis and multiple regressions to determine the relationship between variables. The study findings were presented in form of tables, pie-charts and bar-graphs where applicable. The findings of this study would benefit the Microfinance Institutions in Kenya, government and policy makers and Kenyan banking industry by shedding light on how response strategies adopted by these institutions influence their performance. The study found that strategic planning, product design, training and development and restructuring had a positive and significant influence on the performance of microfinance institutions in Nairobi City County, Kenya. The study concludes that strategic planning includes improving the employee onboarding process and feedback and creating a favorable recognition policy. Organizations are increasingly utilizing design to improve their efficiency, results, and market positioning. Regular training and development programs empower employees to strengthen their weaknesses and acquire new skills and knowledge.