dc.description.abstract | This study was carried out with the purpose of establishing the relationship between funding
structure and financial performance of Microfinance institutions in Kenya. According to
Hartarska (2005) microfinance is the provision of small scale financial services to low income or
unbanked people while funding structure is the mix between equity and debt and it attempts to
explain the mix of securities and financing sources used by corporations to finance real
investment (Myers, 2006). MFIs in Kenya are registered into three different tiers; deposit taking
institutions such as banks, credit only non deposit taking institutions and informal organizations
supervised by an external agency other than the government. The objective of the study was to
determine the relationship between funding structure and financial performance of microfinance
institutions in Kenya. To carry out the study, the researcher adopted a descriptive research
design. The target population in the research was 56 microfinance institutions registered and
operating in Kenya. A sample of 25 was obtained from this population as a representative of the
whole population. Secondary data obtained from the MIX market and annual report of the
sampled microfinance institutions was used. The study was done over a period of 5 years i.e.
between 2009 and 2013.Data analysis was done using SPSS and data findings presented using
figures and tables. Multiple correlation analysis was used to determine the relationship between
the variables under study. The study established that the funding structure employed by
microfinance institutions affects the financial performance of the firm. Debt to equity ratio has a
negative correlation with financial performance meaning the more debt a firm employs in
financing its operations the inferior financial performance it registers. Deposits to assets ratio has
a positive correlation with financial performance implying that the more deposits a microfinance
institution accepts the higher the financial performance. Loan portfolio has a strong positive
correlation with financial performance meaning, a small increase in loan portfolio will lead to a
higher increase in the financial performance. | en_US |