Lucy WamugoJob OmagwaKiio, Joseph Munyao2023-08-072023-08-072023http://ir-library.ku.ac.ke/handle/123456789/26581A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of Degree of Doctor of Philosophy in Business Administration (Finance) of Kenyatta University, April 2023.The dynamism of the microfinance sector has benefited microfinance banks, resulting in significant transformation in the number of users served as well as the diversity of products and services offered. However, numerous microfinance banks have ended up with a liquidity ratio that is much lower than the required limit. Consequently, MFB deposits are dwindling, loan books are reducing, and profits are declining, all of which have an impact on MFBs' intermediation role. Thus, the main objective of this research was to examine how the characteristics of microfinance banks in Kenya influence their liquidity. In particular, the study aimed to investigate the impact of microfinance bank size, management effectiveness, capital adequacy and asset quality on the liquidity of these institutions. Additionally, the study aimed to determine whether bank competitiveness moderates the relationship between firm characteristics and liquidity in microfinance banks in Kenya. The Efficient Structure Theory, Capital Buffer Theory, Market Power Theory and Preference theory of Liquidity informed the study. The study adopted a positivism philosophy and Causal research design. The study's target population was the 13 Microfinance Banks in Kenya that were active between 2012 and 2018. This research used a census method, focusing on all 13 MFBs in Kenya. Secondary data from Central Bank supervisory reports and published financial statements were used in the study. Using Stata software version 14, data was analyzed using descriptive analysis and panel regression analysis. The hypotheses were tested at the 0.05 level of significance. The study findings indicate that microfinance bank size had a negative and significant effect on liquidity. Microfinance management efficiency had positive and insignificant effect on liquidity. Capital adequacy was found to have a negative and significant effect on liquidity while Asset quality had a positive and significant effect on liquidity of microfinance banks in Kenya. The finding further indicated that Bank Competitiveness had a significant moderating effect on microfinance bank size and liquidity. Bank competitiveness did not have a significant moderating effect on management efficiency, asset quality, capital adequacy and liquidity of microfinance banks in Kenya. The study found that some of the firm characteristics have a significant effect while others had insignificant effect. Consequently, the study recommends that microfinance bank managers can effectively manage liquidity by collectively focusing on bank size and take note of all changes that may influence the liquidity levels of the banks. This will let managers of microfinance banks fully anticipate changes or fluctuations in total assets, which may have an impact on these banks' liquidity and carefully monitoring changes in their assets, microfinance bank managers can anticipate potential liquidity issues and take proactive steps to mitigate them, such as selling off assets. Expanding investment opportunities can also help to protect microfinance banks from fluctuations in liquidity by diversifying their asset base. Policy makers and regulators should implement policies to ensure that microfinance banks maintain adequate levels of capital to support their operations. Microfinance bank managers must carefully balance the demand for loans with the need to maintain highquality loan portfolios that do not result in excessive losses. Overall, effective monitoring mechanisms and appropriate interest rate policies are essential for protecting the interests of clients and ensuring the stability and sustainability of the microfinance-banking sector in Kenya.enFirm ResourcesPerformanceDeposit Taking SavingsCredit Co-Operative SocietiesNairobi City CountyKenyaThesis