Corporate social responsibility and financial performance of micro finance institutions in Mombasa County, Kenya
Ndwiga, Jacob Njue
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Over the last four decades, the pressure on organizations to engage in CSR has increased. Being socially responsible involves costs and therefore it should be beneficial to the business and improve sustainability. This study sought to investigate the influence of corporate social responsibility (CSR) on financial performance of microfinance institutions in Mombasa County. The specific objectives of this study were to determine how the firms participation in environmental activities influences the financial performance, to examine the extent to which CSR programs on health influences financial performance and to establish how CSR programs on education influences financial performance. Stakeholder, Integrative and Theory of the firm theories were employed in the study. CSR has been associated with financial performance for organizations but this area has been scantily researched. The study sought to answer the question whether CSR activities of MFIs in Mombasa County have impact on financial performance. To achieve the objective of the study, the researcher adopted a descriptive research design in explaining the relationship between variables in the study. The study population included all the microfinance institutions that are members of AMFI and are situated and operate in Mombasa County. The target population for the study was 34 respondents comprising of the finance managers and branch managers of the 17 microfinance institution that are members of AMFI and are located in Mombasa County. Data collection instrument was questionnaire. The data was then analyzed and the findings recorded by the help of tables and figures. Data analysis was conducted using statistical package for social sciences (SPSS). Data analysis was based on the findings on amounts spent on environment, health and education for five years compared to the net profits and return on investments realized by the microfinance institutions over the period. It was noted that MFIs regard adoption of environmental measures to be of higher importance since it improves relations with suppliers, institutions, donors, community as shown(M=4.12, SD= 0.43). The analysis showed that CSR programs on Health had the strongest positive (Pearson correlation coefficient =.616; P value 0.000) influence on Net profit. Additionally Health had the strongest positive (Pearson correlation coefficient =.922; P value 0.000) influence on ROI. CSR programs on Education, and Environmental activities were positively correlated to Net profit of microfinance institutions (Pearson correlation coefficient = .605 and .600). The finding shows that most of the respondents cited that improving relations with suppliers, institutions, donors, and community was very important through adoption of health activities for corporate social responsibility as shown by a calculated mean of 4.43 and standard deviation of 0.57. The results indicates that most of the respondents mentioned that Benefit of the adoption of education programs for social responsibility enhances corporate reputation. This was supported by a calculated mean of 4.67 standard deviation of 0.43.The study concluded that environmental concerns, health programs and education programs affect financial performance of microfinance institutions. It is therefore recommended that the management of MFIs should carry out an audit of the Corporate Social Responsibility projects they have implemented and provide the shareholders with comprehensive reports on the same in order to ensure that shareholders wealth are well utilized. Further research could be done on the financial and non financial determinants of CSR in Kenya.