Credit Reference Bureau Effect on Financial Performance of Non-deposit Taking Micro Finance Institutions in Kenya
Abstract
The constant challenges that confront local NDT MFIs have brought into focus the
survival and sustainability of NDT MFIs in Kenya. With the coming of Credit
reference bureau, we have witnessed better credit market, lower bad debts, reduced
interest rates, increased profitability, general financial performance and improved
competition within the sector. However, no empirical research have critically
examined the relevance of credit reference bureaus and its impact on financial
performance of NDT microfinance institutions in Kenya. The study sought to
establish the effect of credit reference bureau service on financial performance of
NDT microfinance institutions in Kenya. This study employed descriptive design by
use of questionnaire.Target population was four (4) non deposit microfinance
institutions registered by AMFI Kenya as at Dec 2012 namely ECLOF, AAR Credit,
MUSONI and Juhudi Kilimo. The study used closed ended questionnaires which
were administerd to 21 respondants drawn from the 4 NDT MFIs. When asked
whether in their opinion, CRB information translated into a decrease in nonperforming
loans, fifty seven of the respondents think that the impact is of a low
extent, but twenty-nine percent think that the impact is greater. The standard
deviation of 1.10 suggested a consensus from the respondents on this issue. This
study recommends that the Association of Microfinance Institutions strengthening of
the Non deposit taking MFIs to come up with mitigation measures to control the
external factors that interfere with the credit ratings of their customers; with a
possible measure to cushion non deposit taking MFIs from weak laws that could lead
to blind loaning or borrowing. From the study and subsequent conclusions, the
researcher recommends a further research on the factors prohibiting NDT MFIs from
using CRB information to solve moral hazard problem in Kenya
Publisher
university of nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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