Microfinance in Africa - Interest Rate, Financial Leverage, and Financial Performance: Experience and Lessons in Kenya
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Date
2021
Authors
Karugu, Kahihu Peter
Muturi, Wachira D.
Muathe, Stephen M. A.
Journal Title
Journal ISSN
Volume Title
Publisher
Education and Novel Technology Research Association
Abstract
The purpose of the study was to investigate microfinance in Africa, the interplay of interest rate, financial
leverage and financial performance, experiences, and lessons from microfinance institutions in Kenya. The
study employed positivism philosophy as the research philosophy and used explanatory research designs. The
targeted population was all the thirteen registered Deposit Taking microfinance institutions in Kenya. The
sampling method that was used was the census approach and used secondary data from MFI’s (Microfinance
Institutions) published accounts for the period between 2014-2018. The study was anchored on 3 theories:
Resource-Based theory, Dynamic Capability Theory, and International Fisher Effect theories. Various diagnostic
tests were applied to ensure we had a suitable empirical model. Data analysis was carried out using both
descriptive and inferential statistics using panel data multiple regression analysis. The study results indicated
that interest rates and financial leverage have a positive effect on the financial performance of microfinance
institutions. The MFIs owners and managers should put in place risk management measures such as risk
identifications to prevent the MFIs from the effect of interest rate and financial leverage as they affect their
financial performance
Description
An Article Published in Journal of Applied Economics and Business
Keywords
Financial performance, Financial leverage, Interest rate, Kenya, Microfinance institutions