Strategic Management Practices and Credit Performance of Microfinance Institutions in Kenya

Abstract

Adoption of strategic management practices conceptually enables firms to understand their strategic position and identifying how to make strategic choices for the future and manage strategy in action. Employing strategic management is critical to firm’s performance. Strategic management demands efficient systems to counter events which appear unpredictable and that can sustain their operations leading to minimizing risks involved. Theoretical and empirical evidence supports the argument that adoption of superior strategies leads to improved organizational performance. However, most studies have dealt with large firms and put diverse conditions on the benefits of strategic management to be felt. The main challenge lies with small firms which do not have the resources and capacity to implement strategic management practices. The study sought to determine the strategic management practices adopted by microfinance institutions in Kenya and the effect of strategic management practices on credit performance among the MFIs. This study targeted fifty-seven MFIs in Kenya as per the AMFI website. The study used descriptive design and data was collected using primary and secondary data. The study found that most MFIs had adopted strategic management practices in relation to situational analysis, strategy formulation, implementation and evaluation. The conclusion was that firms which employ robust strategic management practices performed exemplary well.