| dc.description.abstract | There are divergent views among scholars in regard to outreach and financial sustainability of microfinance institutions (MFIs). Two main schools of thought have gained prominence on the subject. The Institutionists school of thought lays more emphasis on the institutional framework of the MFIs aimed at strengthening the financial muscle of the institutions from internally generated resources without depending on external sources such as donations. The proponents of this school of thought argue that for the poverty alleviation goal of microfinance to be achieved, strong financially stable MFIs need to be created first. The Welfarists school of thought on the other side argue that, the source of funds notwithstanding, MFI‟s should reach the poorest cadre of society and that the main objective of MFIs should be poverty alleviation and not necessarily creation of strong internal balance sheets. It is against this conflicting background that this research was necessitated to empirically study the relationship between financial sustainability and outreach of MFIs in Kenya. The study utilized cross-sectional data for the year 2013 used in the Association of Microfinance institutions of Kenya in their 2014 microfinance sector report. The data was derived from the individual institutions audited financial statements as at December 2013.The findings of this study indicate that there is a strong positive relationship between financial sustainability and outreach of MFIs in Kenya, this implies that MFIs that have strong financial muscle have the ability to reach more clients and consequently contribute to poverty alleviation. The study also found out that there is a strong positive relationship between outreach of MFIs and the number of branches meaning that the more branches an MFI has, the more clients it is able to serve. The study also revealed that MFIs headed by male CEOs have greater average outreach in terms of active clients (499,912) served compared to the MFIs whose head is female whose average clients was found to be 243,979. Deposit taking MFIs were also found out to have a larger outreach at an average of 1,027,890 active clients compared to credit only MFIs hose average active clients was found to be 17,433.
These findings augment the theoretical arguments that DTMs have a higher capacity to serve more clients because of their huge financial muscle resulting from deposits mobilized. Recommendations drawn from the results include the need to encourage formation of more DTMs, create conducive environment for MFIs expansion to more areas with an aim of increasing outreach for poverty eradication. Stakeholders are also encouraged to put up measures aimed to improve OSS since it is seen to have a positive impact on outreach and ultimately to poverty alleviation. In view of these findings, this study is more inclined to the Institutionists school of thought, however more research is necessary especially with regard to the depth of outreach that would shed more light on the effect of pursuit of financial sustainability on the poorest of the poor in society. | en_US |
