Influence of Product Diversification on Financial Performance of Microfinance Institutions in Nairobi County, Kenya.
DOI:
https://doi.org/10.47941/ijf.1357Keywords:
Product Diversification, Financial Performance, Microfinance Institutions in Nairobi County, Kenya.Abstract
Purpose: To examine the influence of product diversification on financial performance of microfinance institutions in Nairobi County, Kenya.
Methodology: The study applied descriptive research design during the collection of data. The study’s target population was 14 microfinance banks. The sample size was selected using simple random sampling method after determination using Kothari (2004) sampling formular to obtain 19 operations managers, 34 tellers, 40 credit officers, and 28 customer care officers. The study collected primary and secondary data. The study conducted a pre-test study of the questionnaires in Cooperative bank and I&M banks in Nairobi County. Further, the study tested reliability and validity. Further, quantitative data was analyzed using SPSS software version 25 to generate descriptive and inferential statistics. The various descriptive analysis was frequencies, percentage and mean, while linear and multiple regression analysis was done as part of inferential statistics analysis.
Results: The questionnaire results disclosed that 87(89%) strongly agreed and 9(9%) agreed (mean of 4.83) that there were efforts from the management to allow the existence of different types of loan products with various requirements. Nevertheless, 21(21%) strongly disagreed and 19(20%) disagreed (mean of 2.92) that the staff were always encouraged to offer suggestions to the management on how products could be improved further to incorporate the needs of each customer. Additionally, under model summary, R was 0.746 and R-square was .557 at a Durbin-Watson value of 1.442. Further, the significance coefficient of ANOVA was 0.001 hence less than 0.05. The results therefore enabled the study reject the null hypothesis.
Unique contribution to theory, policy and practice: The conclusions made on product diversification was that the management failed to incorporate various improvement suggestions made on the different implemented products. The issues gave a major reason why MFIs revenue was declining in Kenya. That is, in as much as they had different products, the specific client needs were not being met and if they were met, it was very expensive to maintain the products. The study recommends that the management of MFIs should commission a special committee of expert to review the requirement of each and every product being offered.
Downloads
References
Association of Microfinance Financial Insititutions in Kenya (2023). Microfinance sector report. Association of Microfinance Financial Insititutions in Kenya.
Bank of Japan (2019). Financial system report. https://www.boj.or.jp/en/research/brp/fsr/data/fsr190417a.pdf
Central Bank of Kenya (2021). Annual report and financial statements 2021/2022. https://www.centralbank.go.ke/uploads/cbk_annual_reports/319054182_2022%20Annual%20Report.pdf
European Union (2021). Microfinance in the European Union: Market analysis and recommendations for delivery options in 2021-2027. https://ec.europa.eu/social/BlobServlet?docId=23029&langId=en
Gunu, U., & Suleiman, U.G. (2020). Effect of income diversification on the financial performance of quoted manufacturing firms in Nigeria. Journal of Research in Emerging Markets, 3(1), 44-57. https://doi.org/10.30585/jrems.v3i1.569
Gustavson, K., Roysamb, E., & Borren, I. (2019). Preventing bias from selective non-response in population-based survey studies: Findings from a Monte Carlo simulation study. BMC Medical Resolution Methodology, 19(1), 120-130. https://doi.org/10.1186/s12874-019-0757-1
International Monetary Fund (2020). Georgia: Technical assistance report: Strengthen regulation, supervision, and oversight of micro lending institutions. https://www.imf.org/-/media/Files/Publications/CR/2020/English/1GEOEA2020005.ashx
Kamchape, H.A. (2020). Impact of procurement policies and procedures on supply chain performance of microfinance banks in Tanzania: A case study of finca microfinance bank [Master’s Thesis, College of Business Education]. Tanzania. http://dspace.cbe.ac.tz:8080/xmlui/bitstream/handle/123456789/706/kamchape-report.pdf?sequence=1&isAllowed=y
Kothari, C.R. (2004) Research methodology: Methods and techniques (2nd Ed). New Age International Publishers
Mandipa G., & Sibindi, A.B. (2022). Financial performance and working capital management practices in the retail Sector: Empirical evidence from South Africa. Risks, 10(63), 1-17. https://doi.org/10.3390/risks10030063
Maranga, D, Ngali, R., &Wepukhulu, J, M. (2022). Product diversification and profitability of listed commercial banks in Kenya. International Academic Journal of Economics and Finance, 3(7), 70-88. https://iajournals.org/articles/iajef_v3_i7_70_88.pdf
Mehmood, R., Hunjra, A.I., & Chani, M.I. (2019). The impact of corporate diversification and financial structure on firm performance: Evidence from South Asian Countries. Journal of Risk and Financial Management, 12(1), 1-17. https://doi.org/10.3390/jrfm12010049
Ndungu, J.G. (2019). Effect of diversification on financial performance of commercial banks in Kenya. International Journal of Current Aspects, 3(5), 267-285. https://doi.org/10.35942/ijcab.v3iV.67
Nyawira, G.C. (2021). Financial management practices and financial performance of microfinance banks in Kenya [Master’s Thesis, Kenyatta University]. Kenya. https://ir-library.ku.ac.ke/bitstream/handle/123456789/23545/Financial%20Management%20Practices%20....pdf?sequence=1
Orichom, G., &Omeke, M. (2021). Capital structure, credit risk management and financial performance of microfinance institutions in Uganda. Journal of Economics and International Finance, 13(1), 24-31. https://doi.org/10.5897/JEIF2020.1096
Taber, K.S. (2018). The use of Cronbach’s alpha when developing and reporting research instruments in science education. Research in Science Education, 48(2), 1273–1296.https://doi.org/10.1007/s11165-016-9602-2
United Nations Economic Commission for Africa (2020). Economic report on Africa 2020: innovative finance for private sector development in Africa. https://www.uneca.org/sites/default/files/fullpublicationfiles/ERA_2020_mobile_20201213.pdf
Wernerfelt, B. (1984).A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180. https://doi.org/10.1002/smj.4250050207
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Margaret Wanja James, Dr. Nancy Rintari, Dr. Wilson Muema
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
