Balanced Score Card and Competitiveness of Microfinance Institutions in Kenya
Gichobi, Eric Bundi
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The aim of this study was to establish the impact of balanced scorecard on the competitiveness of micro-finance institutions in Kenya. While Micro-Finance Institutions have been integral in lending and availing financial services to low income earners, their competitiveness has been declining over the years. The institutions compete for the same market and customers with established commercial banks while still gambling with the ever-changing market dynamics. However, little has been established empirically on whether the microfinance institutions have embraced balanced scorecard, and how this could affect their competitiveness. The study explored the competitiveness of microfinance institutions in Kenya through the lenses of the four perspectives of the balanced scorecard, that is, internal business processes, financial, growth and learning as well as Customer focus. The scope of the study was the 48 registered Micro Finance Institutions in Kenya. The study was informed by the transformative learning theory, relationship theory of marketing, dynamic capabilities theory, and resource dependence theory. A descriptive research design was used while the target population comprised of the 48 registered Micro-Finance Institutions in Kenya. The sample size was drawn from the senior management in these Micro-Finance Institutions comprising of finance managers, branch managers, customer relationship managers and operations managers making a total of 192 respondents. A structured questionnaire was 1!used 1!to collect the primary data for the study. The questionnaire was pilot-tested using 19 respondents, which was equivalent to 10% of the sample size (192). This helped obtain reliability and validity of the research instrument. The collected primary data was analysed using descriptive and inferential statistics through SPSS. The descriptive statistics comprised of mean, standard deviation, percentages and frequencies. The inferential statistics on the other hand comprised of analysis of variance, R-square, the regression coefficients and the P-values. The findings revealed that financial perspective, organizational learning, internal business process and customer focus had a significant influence on the competitiveness of Micro-Finance Institutions in Kenya. It was concluded that through financial perspective, the MFIs would enhance their financial capability to run their operations. Internal business process would enhance the ability of the MFIs to have a smooth efficient operational framework for continued competitiveness. Organizational learning was concluded to be essential in promoting knowledge sharing and ability to solve problems in the MFIs, while customer focus is essential in bringing the customers closer to the MFIs and helping the institutions understand and meet their needs. The study recommended that there is need for the management of the MFIs in Kenya to embrace financial perspective; organizational learning, internal business process and customer focus as balanced scorecard aspects to stir competitiveness. The findings from the study will be significant to the management of the Microfinance Institutions, the policy makers including the regulator and will add value to body of knowledge for use by current and future researchers. Future studies are recommended to establish other fundamentals of balanced scorecard that would be missing in the MFIs and critical to their competitiveness.