Competitive Strategies and Sustainability of Microfinance Institutions in Murang’a County, Kenya.
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Date
2018-03
Authors
Muhonja, Caroline
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Microfinance institutions play an important role in poverty alleviation because they serve to enable the financial inclusion of the poor people. It is through such institutions that these people can access financial services like credit, savings, money transfer and insurance. The microfinance industry has witnessed intense competition in the recent decades as the industry becomes mature. Due to this, attention has shifted to their sustainability; which is important to ensure that the poor would still be able to access these services in the future. To be able to grow and survive, MFIs need to formulate and implement appropriate competitive strategies that would assist them in achieving a competitive advantage. This study sought to examine the effect of competitive strategies on sustainability of MFIs in Murang’a County, Kenya. The specific objectives were: to investigate the effect of cost leadership, focus, differentiation and product development strategies on sustainability of MFIs in Murang’a County. The study was anchored on the following theories: Porter’s generic competitive strategies, Ansoff’s market/product development model and the resource-based theory. The study employed a descriptive survey research design. The target populations were the senior managers in the 20 MFIs in the county, who included the branch managers, operations managers and senior credit officers. Due to the manageable number of target population, a census survey was adopted. Self-administered questionnaires were used to collect data, using the drop-and-pick method which gave respondents ample time to fill the questionnaire. The reliability of the instrument was tested using Cronbach’s alpha. The reliability of 0.7 showed that the instrument was reliable. Data analysis was done using both descriptive and inferential analysis. Descriptive analysis was done to summarize the data; while inferential analysis such as Pearson’s Product-Moment correlation and multiple regression analysis was used to examine the relationship between the independent variables (cost leadership, focus, differentiation and product development) and dependent variable (sustainability of MFIs). The responses were presented in form of tables, charts and diagrams. The correlation analysis revealed that cost leadership, focus, differentiation and differentiation and product development strategies all had a positive and moderate relationship with sustainability of MFIs. This study is significant to MFI owners and managers, scholars and the donors and government. To the MFI owners and managers, the findings of the study highlight the need to adopt competitive strategies to achieve success and sustainability of MFIs hence ensuring the continued provision of financial services to the poor. For the scholars and researchers, since the findings of this study reveal that product development is the least competitive strategy to predict MFI sustainability, future studies may be interested in investigating how the MFIs may have adopted market/product development strategy to achieve sustainability. For the donors and government, the findings can be used in designing capacity building programmes for MFI owners and managers to help empower them, so that they can help their institutions to achieve sustainability; thus ensuring a continuance of their financial services to the poor and those from low economic group. For MFIs to achieve sustainability, the study recommends that the MFI managers need to continue adopting cost leadership, focus and differentiation strategies. However, there is need to improve on the adoption of product development strategies in order to meet the needs of an ever-increasingly demanding customer. The study concludes that there is a need for MFIs to adopt competitive strategies so that they can continue providing financial services to the poor. Finally, the study also recommends that future studies should be conducted in other counties for comparative purposes.
Description
A Research Project Submitted in Partial Fulfillment of The Requirements for The Award of Master of Business Administration Degree (Strategic Management), School of Business, Kenyatta University. March, 2018.