Firms’ Characteristics and Credit Risk of Microfinance Banks in Kenya

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dc.contributor.advisorRobert Mugoen_US
dc.contributor.authorMomanyi, Jared Nyakundi
dc.date.accessioned2023-08-07T08:37:14Z
dc.date.available2023-08-07T08:37:14Z
dc.date.issued2022
dc.descriptionA Research Project Submitted to the School of Business Economics and Tourism in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University.en_US
dc.description.abstractThe bank’s contribution in stimulating economy to enhance stability and development cannot be underestimated. They increase the mobilization of capital for effective investment. In Kenya, the Microfinance institutions (MFIs) are arguably the most active financial institution in East Africa. The role of microfinance banks in mobilizing credit in maximizing the welfare of their members and in Kenya's economic growth and development cannot be underestimated. Kenya's microfinance banks are known to be among the most vibrant financial institutions in East Africa. However, microfinance banks face high credit risk due to the high rate of non-performing loans, which limits their role as intermediaries. As a result, this led to significant losses being recorded by various banks, such as Faulu Microfinance Bank Limited. In this regard, the influence of Firms characteristics on the credit risk of microfinance banks in Kenya has been analysed. In particular, an approach is taken of the impact of management efficiency, liquidity, earning capacity and capital adequacy on the credit risk of microfinance banks in Kenya. Structural efficiency theory, agency theory, and safety theory were used as the original theory for the study. The descriptive study design was applied to analyse 13 Microfinance banks from 2013 to 2020 based on the census method. The secondary data collected were analysed with the help of a panel regression and descripted statistic method. The findings revealed that the income capacity depicted significant but negative impact on credit risk. Liquidity depicted a positive and insignificant influence on credit risk; moreover, inappropriate management efficiency and depicted a positive influence on credit risk; Capital adequacy depicted an inverse influence on the credit risk of Kenyan microfinance banks. Moreover, interest rates have a negative regulatory influence between company characteristics and credit risk among the Kenyan microfinance banks. Based on the findings, the study recommended that the management of microfinance banks should diversify their operations to reduce credit-related risks facing microfinance banks, which is a crucial determinant that ensures increased earning capacity. The study recommends further research on the influence of bank liquidity on the credit risk of microfinance banks in Kenya using a longer time horizon and different methods.en_US
dc.description.sponsorshipkenyatta universityen_US
dc.identifier.urihttp://ir-library.ku.ac.ke/handle/123456789/26570
dc.language.isoenen_US
dc.publisherkenyatta universityen_US
dc.subjectFirms’ Characteristicsen_US
dc.subjectCredit Risken_US
dc.subjectMicrofinance Banksen_US
dc.subjectKenyaen_US
dc.titleFirms’ Characteristics and Credit Risk of Microfinance Banks in Kenyaen_US
dc.typeThesisen_US
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