Prudential Regulations and Financial Performance of Microfinance Banks in Kenya
| dc.contributor.author | Muchai, Grace Wanja | |
| dc.date.accessioned | 2025-03-07T09:07:58Z | |
| dc.date.available | 2025-03-07T09:07:58Z | |
| dc.date.issued | 2024-10 | |
| dc.description | A Research Project Submitted to the School of Business, Economics and Tourism Department of Accounting and Finance in Partial Fulfilment for the Award of Degree in Master of Business Administration (Finance Option) Kenyatta University, October 2024. Supervisor Bancy Wawira Muchira | |
| dc.description.abstract | As financial intermediaries, microfinance banks are crucial. The growth of an economy is significantly influenced by microfinance institutions’ financial performance, in addition to their function in intermediation. Microfinance banks lack proper guidelines in managing their resources hence the need for prudential regulations to improve their performance and attract investors. The prudential guidelines and financial health of Kenyan microfinance banks were examined in this study. The precise objectives looked on how credit, capital adequacy, and liquidity regulations affected Kenyan banks’ financial performance. Lastly, the researchers looked into how the microfinance institutions’ size impacts prudential regulations and financial performance. The study was grounded in the theories of stakeholders, capital buffer, and liquidity management. The sample approach used was census sampling, and the research design was explanatory and also Empirical model will be used to analyses the data. The 13 MFBs that make up the target population and are accredited by the Central Bank of Kenya produced audited financial statements and yearly reports, which provided secondary data. Normality, multicollinearity, stationary, autocorrelation, heteroscedasticity, and diagnostic tests were performed on the data. Additionally, multiple regression analyses, correlation analyses, and descriptive statistics were carried out. The results show that capital adequacy regulations significantly influenced MFBs' financial performance, highlighting the importance of maintaining sufficient core capital. However, liquidity regulations did not significantly impact performance, suggesting customer deposit ratios may not be a critical factor. Credit regulation, specifically non-performing loans, had a significant negative impact, highlighting the importance of effective credit management. The association between performance and prudential regulations is not affected by MFB size. A beta coefficient of 0.0033 indicated that MFB size had a favorable effect, according to the data. Nevertheless, this effect did not reach statistical significance (p-value = 0.710, larger than 0.05). These findings highlight the importance of targeted and effective regulatory measures in the microfinance sector. Credit regulation, as measured by non-performing loans, had a statistically significant negative impact on MFBs’ financial performance. This conclusion demonstrates how essential it is for these institutions to have efficient credit control and management in order to keep their financial health in good standing. In order to abide by ethics guiding this research, research permit was collected from NACOSTI and also an introduction letter from the University. Furthermore, transparency and integrity were exhibited. Based on the study's findings, recommendations may be made to enhance both the regulatory environment and the operating procedures of Kenyan Microfinance Banks (MFBs). The requirements for adequate capital should be tailored to the specific size and risk profiles of individual MFBs, and the CBK should think about doing this. This can assist ensure the stability of these institutions, which is especially important considering the reported variances in capital sufficiency among MFBs. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/29732 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Prudential Regulations and Financial Performance of Microfinance Banks in Kenya | |
| dc.type | Thesis |