| dc.description.abstract | Microfinance institutions play a vital role in the economic development of many developing countries through the provision of a wide range of financial products and services to the poor, low-income households and micro and small enterprises. This study investigated the factors that influence financial innovation in MFI's and its impact on financial performance in micro finance institutions in Kenya. Financial innovation in Microfinance institutions in Kenya has been influenced by new technology, macroeconomic conditions (e.g. interest rates, inflation), demand for financial services and client's ability to use innovation, cost reduction, increase in financial risk, and competition in financial service markets, size of financial institution and legislation and financial supervision.
The research project was a census study of MFls registered with the Association of Microfinance Institutions (AMFI) in Nairobi, Kenya. Primary data was collected through a questionnaire administered to the MFI's. A conceptual model was developed to show factors influencing financial innovation in MFI,s and its impact on financial performance. An analytical model was developed to determine the strength of the relationship between variables.
Analysis of the data confirmed that new technology, macroeconomic conditions (e.g. interest rates, inflation), demand for financial services and client's ability to use innovation, cost reduction, increase in financial risk, had the greatest importance in influencing MFI innovation. Financial innovation and financial performance is positively related. As noted, the findings based on the coefficient of regression, new products/services, new processes, institutional innovation, and new technology were found to be positively associated with financial performance in MFls in Kenya. | en_US |
