Organisational Resources and Performance of Selected Credit only Microfinance Institutions in Nairobi City County, Kenya

Abstract

The environment in which Microfinance Institutions operate has significantly changed over the years driven by technological advancement such as mobile and internet banking and borrowing, more informed customers with volatile tastes and preferences, globalisation, E-commerce, market liberalisation among other factors which has intensified competition. Since organisations compete on the basis of the resources at their disposal, Microfinance Institutions must identify resources that guarantee them greater performance and survival. The enactment of Microfinance Act in 2006 led to significant growth in the sector. However, this growth also brought a lot of challenges such as competition resulting from standardized products, corruption and lack of transparency amid the growing need for adequate resources. These challenges have adversely affected the performance of these Microfinance Institutions. Therefore, the study pursued to find out the relationship existing between organisation resources and the performance of Credit Only Microfinance Institutions in Nairobi City County, Kenya. Specifically, the study sought to determine the relationship between financial resources, physical resources, human resources and performance of Credit Only Microfinance Institutions in Nairobi City County, Kenya. The study took on descriptive and explanatory research design with a target population of 309 respondents drawn from the 30 Credit Only Microfinance Institutions headquartered in Nairobi City County, Kenya. Proportionate stratified and simple random sampling technique was used to select a sample of 171 respondents from the top, middle and lower level management in each Microfinance Institution. Collection of primary data was done using semi-structured, self-administered questionnaire. Quantitative data from closed ended questions was analysed using both descriptive statistics such as mean and standard deviation as well as inferential analysis using correlation coefficient and multiple regression analysis. Data was presented in tables and graphs. Analysis of qualitative data obtained from open ended questions was done using content analysis and presentation done in prose form. The study also took into consideration any ethical issues that may arise such as voluntary participation in research and confidentiality of the data obtained. The study found that financial resources affected their firm’s performance to great extent. The study also established that physical resources affected performance to a great extent while human resources affect performance of microfinance institutions to a very great extent. Correlation analysis showed that performance of credit only microfinance institutions was positively correlated with financial, physical and human resources. Regression results showed that financial, physical and human resources significantly affected performance of credit only microfinance institutions in Nairobi City County. The study therefore recommended that the management should carefully manage financial, physical and human resources to improve performance of microfinance institutions. The study was however limited to data collected from credit only microfinance institutions for a period of five years. The study therefore suggests that other studies be conducted on other deposit taking microfinance institutions and other financial institutions such as commercial banks to establish if similar results would be obtained. The study also suggests that others studies should be conducted covering periods longer than five years to if similar results would be obtained.