Determinants of Efficiency of Microfinance Institutions in Kenya
Loading...
Date
2024-04
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Microfinance is one of the concepts that was coined and developed in order to provide saving and borrowing solution to the poor population of the world. Microfinance has come up as one of the ways to improve financial incorporation for the bottom econonomically weak population of the world and the small and medium enterprises that have always been left out by the mainstream commercial banking system. Despite this important role, microfinance institutions efficiency in Kenya has not been fully attained in recent years. The objectives of the study was to assess the efficiency determinants of Kenya’s microfinance institutions. The objectives of the study was anchored on investigating the determinants of both technical efficiency and cost efficiency of the microfinances in Kenya. This study utilized secondary data obtained from relevant sources with mix market and association of Microfinance institutions in Kenya between 2015-2019. The study employed use of Data Envelopment analysis (DEA) for cost and technical efficiency scores generation then ran panel data using tobit analysis for regression to examine the determinants for cost and technical operation efficiency among microfinances in Kenya. A sample of 10 microfinances was considered especially those which had submitted complete data with mix market. The study used non experimental research design since the researcher has no control over what was happening but can only report what is happening or what has happened. The findings of the study indicated that credit risk had a negative impact on technical efficeiy which was significant. Also, capitalization was found to have a positive significant impact on cost efficiency and total expenses was found to have negative and significant effect on cost efficey of microfinances in Kenya. Understanding factors that determine the efficient of microfinances ought to help managers know the areas to emphasize on, in order to improve on efficiency, leading to improved financial performance hence enhancing economic growth and development. Further areas of studies can be pursued on assessing the technological impact on cost and technical efficiency of microfinances. In addition, a study can be conducted on macroeconomic variables and microfinances efficiency in Kenya.
Description
A Research Project Submitted to the Department of Applied Economics in the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Economics (International Trade and Finance) of Kenyatta University, April 2024.
Supervisor
Joseph Muniu