dc.description.abstract | The objective of this study was to find out the relationship between profitability growth
and the yield on gross portfolio of micro-finance institutions in Kenya. The performance
of microfinance institutions has been studied extensively both locally and internationally.
In the global arena for instance, Dissanayake (2012) tried to investigate the determinants
of profitability proxied by ROE for eleven MFIs in Sri-Lanka for the period covering
2005-2011. It is evident that there exists no study in Kenya that has ever studied the
relationship between yield on gross loan portfolio and profitability. Therefore is it against
this backdrop that this study sought to find out the relationship between profitability
growth and the yield on gross portfolio of micro-finance institutions in Kenya by
answering the question: What is the relationship between profitability growth and the
yield on gross portfolio of micro-finance institutions in Kenya?
This research involved a cross sectional survey of the credit only micro finance
institutions operating in Kenya. The population of the study in this research was the
microfinance institutions headquartered in Nairobi. The sample size of this study was 5
credit only microfinance institutions. From the 5 credit only microfinance institutions, the
study targeted the chief financial managers from each to make a sample size of 5
respondents. The study used primary data that was collected through a selfadministered
questionnaire that consisted both open and closed ended questions
designed to elicit specific responses for qualitative and quantitative analysis respectively.
The study findings revealed that increased competition has led to increased efficiency and
that the increased efficiency in turn has allowed MFIs to generate increasing profits from
lower yields. Furthermore the study found out that NGO MFIs generally achieve a higher
Return on Assets than licensed and supervised MFIs and that in the absence of
competition, even highly inefficient MFIs can remain profitable by simply raising their
interest rates. The Pearson correlation analysis to determine the relationship among the
independent and variables showed that the variables are perfectly and positively
correlated and vice versa. This shows that the Profitability growth and growth in
portfolio yield variables are dependent on each other for the Yield on Gross Portfolio. | en_US |