Influence Of Management Practices On Performance Of Microfinance Institutions In Embu County, Kenya

Abstract

The anchor Vision 2030 is to transform Kenya into an industrialized middle-income country that provides high quality of life to its citizenry. Vision 2030 defines the financial sector as vibrant and globally competitive that will promote high level of savings to finance Kenya's investment needs. Giving Microfinance sector muscle will spur Kenya towards vision 2030.The government through vision 2030 has identified the financial sector as one of the six priority sectors in realising this vision. The management of project portfolio involves effective allocation of resource when selecting projects that have high potential for the development of future products and leaders. In Kenya, MFIs are in advanced phase of adopting the project portfolio management practices. Many of them face a challenge of deploying qualified project portfolio managers who can provide leadership and direction to how appropriately PPM are supposed to be overseen. The purpose of this study was to establish how project portfolio management practices affect the performance of MFIs in Embu County in Kenya. The specific objectives was to assess the influence of portfolio inventory on performance of MFIs in Embu County in Kenya, to establish the influence of portfolio analysis on performance of MFIs in Embu County in Kenya, to determine the influence of portfolio planning on performance of MFIs in Embu County in Kenya, to assess the influence of portfolio tracking on performance of MFIs in Embu County in Kenya, to identify the influence of portfolio review on performance of MFIs in Embu County in Kenya. The study was grounded on the control theory and decision theory. The study adopted a descriptive research design targeting senior and middle level management staff of the MFIs in Embu County in Kenya. The respondents were drawn from finance, marketing, operations, risk and compliance and ICT departments since all their functions are centralized. The target population therefore comprised of 357 management employees of the MFIs in Embu County. The study selected 114 respondents using stratified proportionate random sampling technique by adopting Kothari’s (2004) formula. Primary data was obtained using self-administered questionnaires. The pilot testing was conducted using the questionnaires through drop and pick method. The study data was analyzed using the SPSS (version 25.p). The output was presented using descriptive statistics such as frequencies, percentages, mean and standard deviation on tables, charts and prose for interpretation and making conclusions. The qualitative data was analyzed using content method of analysis. Inferential data analysis was done using multiple regression analysis to establish the relationships between the dependent and independent variables. The level of significance of the analysis is at 0.05. The study found that fixed income investments have increased the financial stability that real estate investment has enhanced our outreach and that mortgage investment has boosted MFIs profitability and the study found that risk sensitivity analysis has enhanced financial stability and that stress testing analysis has minimized profitability risk. The study concluded that portfolio inventory had the greatest influence on performance of MFIs followed by Portfolio planning, then Portfolio review then portfolio analysis while Portfolio tracking had the least influence on the performance of MFIs. The results also show that there is a positive association between portfolio planning and performance of MFIs (r= 0.718) The study recommends that Portfolio managers should be required to periodically verify that investment performance reports are accurate and that investment policy compliance statements are updated whenever a material change occurs and that MFIs should train staff on the use of project portfolio management practices in order to enhance the implementation of project portfolio management practices.