Strategic Innovation and Organizational Performance of Microfinance Banks in Nairobi City County, Kenya
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Date
2024-11
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Kenyatta University
Abstract
Microfinance banks' productivity is critical in sustaining a healthy micro-banking system. Bad organizational performance has an impact on microfinance banks' ability to withstand negative shocks, which has an impact on solvency. A report from Kenya's Central Bank (2018) attested that Microfinance banks face severe financial implementation problems. This study focused on microfinance banks in Nairobi City County, Kenya, and how innovative strategies affected their success. The precise objectives sought to explore the impact of market innovation, product innovation, process innovation and technology innovation regarding the success of micro finance banks. A few theories, including dynamic capability, innovation diffusion, Schumpeter's innovation theory, stakeholders' theory and Theory and Practice of Microcredit were used to anchor the study. An explanatory study design was utilized in the investigation. The study's population was 13 microfinance banks within Nairobi County. All the microfinance banks were included in the study. From each of the firms, the researcher targeted managers representing the following departments: marketing, finance, operations and information technology. The target population was 140 respondents. Using Krejcie & Morgan table for sample size determination, the study sample size was 104. The study's primary data was collected via semi-structured questionnaires. The instrument's reliability and validity were examined. Descriptive statistics were based on means and percentages. To evaluate the relationship between the dependent and independent variables, the study used regression analysis and Pearson correlation coefficient. The results were presented using graphs and tables. Qualitative data was presented in the form of narratives. Market innovation was discovered to have a favourable and substantial effect on the success of microfinance banks. Furthermore, the findings demonstrated that microfinance banks' performance was positively and significantly affected by product innovation. Furthermore, the organizational performance of microfinance banks was positively and significantly affected by process innovation. Further, the results showed that microfinance organizations benefit from technological innovation. The study's findings demonstrated that microfinance banks' performance was significantly and positively affected by market innovation. In addition, developing a packaging strategy for microfinance products enhances their performance. Further, the packaging strategy was also found to be effective in attracting new customers. A promotion strategy helps in reaching out to a wider market. The study concluded that the development of new products in most microfinance banks is informed by the needs of their customers. The microfinance bank's performance was improved through increased spending on product research and development. Researchers found that the needs of microfinance banks' stakeholders shaped the creation of innovative procedures. Further, process improvement is essential to enhance the general efficiency of the organization. In addition, most microfinance banks are still in competition for market share with their rivals. Furthermore, the improvement of the quality of service of most microfinance banks enhanced the microfinance banks’ performance. The study indicated that microfinance banks that have not completely adopted market innovation as a means of increasing performance should seek ways to do so because a correlation exists between market innovation and organizational performance. Management at microfinance banks should make sure that all their employees are involved in product development by coordinating their efforts, this will enhance their performance. Microfinance banks ought to undertake regular changes in the organizational structure so that they can enhance their performance. Microfinance banks should put money into new systems and procedures like inventory management systems to take advantage of the benefits that come with new technology.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirement for the Award of the Degree of Master of Business Administration (Strategic Management) of Kenyatta University, November, 2024
Supervisor:
1.Paul Waithaka