Strategic Response and Performance of Microfinance Institutions in Nairobi City County, Kenya
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Date
2024-10
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Kenyatta University
Abstract
Microfinance institutions (MFIs) in Kenya play a crucial role in providing financial services to underserved populations, particularly small-scale entrepreneurs and low-income households. However, they face a myriad of challenges that can hinder their effectiveness and sustainability such as regulatory challenges, access to capital, operational challenges client repayment issues, market competition and technology adoption. Therefore, this study sought to investigate the influence of strategic response on the performance of microfinance institutions in Nairobi City County, Kenya. The study specific objectives were to examine the influence of strategic planning, product design, training and development and restructuring on the performance of microfinance institutions in Nairobi City County, Kenya. The study was guided by Resource Based View Theory, Structural Contingency Theory, Ansoff Matrix and Human Capital Theory. This study employed a descriptive research design. The target population for this study was 13 Micro finance institutions in Nairobi City County, Kenya. The total number of respondents was 833 employees working with the 13 micro finance institutions. To ensure that all cases are represented, respondents were classified by the organizations they work with using a stratified sampling method. A simple random selection method was utilized in selecting the respondents. The study had a sample size of 270 respondents. The study used primary data that was collected using questionnaires. Questionnaires were piloted to 27 respondents working with momentum credit limited in Nairobi County, Kenya. The validity of research instrument was tested using in content, criterion and construct validity. Cronbach’s alpha reliability coefficient was used to test the reliability of the questionnaire. Qualitative data was analysed using content analysis technique and presented in narrative form. Quantitative data was analyzed using descriptive statistics such as mean and standard deviation. The study further carried out inferential statistics that included correlation analysis and multiple regressions to determine the relationship between variables. The study findings were presented in form of tables, pie-charts and bar-graphs where applicable. The findings of this study would benefit the Microfinance Institutions in Kenya, government and policy makers and Kenyan banking industry by shedding light on how response strategies adopted by these institutions influence their performance. The study found that strategic planning, product design, training and development and restructuring had a positive and significant influence on the performance of microfinance institutions in Nairobi City County, Kenya. The study concludes that strategic planning includes improving the employee onboarding process and feedback and creating a favorable recognition policy. Organizations are increasingly utilizing design to improve their efficiency, results, and market positioning. Regular training and development programs empower employees to strengthen their weaknesses and acquire new skills and knowledge. Restructuring leads to decrease in operation costs because when staff are dismissed payroll expenses will be lower and outsourcing labour can be cheaper than in house. The study recommends that the organizational management should investing plenty of time upfront to map out the strategic planning process. The organizational management need to have a clear understanding of what problem they are solving and how their product is the best solution. The management should know what their learning preferences are to show a clear demand from workers for the continuation of in-person training. The organization should identify and select leaders at each critical level of the organization who can become change champions.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration (Strategic Management) of Kenyatta University, October 2024.
Supervisor
Maina Rugami