The Relationship Between Credit Information Sharing and Financial Performance of Deposit Taking Microfinance`s in Kenya

Abstract

In any economy access to credit facilities is crucial to provision of liquidity to do businesses, which constitute economic activities necessary for any thriving and financially healthy economy. To enable this function, information on borrowers of credit is crucial to ensure financial losses are not suffered by lenders who provide this credit, through CIS, which this is made possible, CIS in the financial sector is facilitated by CRBs. This study aimed at establishing the relation between CIS and financial performance of DTMs in Kenya. To conduct this study and realize its objective, descriptive statistics was employed and focused on 12 DTMs operational as at 31st December 2015 using secondary data. Collected data was tabulated and descriptive statistics used for the analyses. The study found that credit information sharing and management efficiency has insignificant negative relation with DTMs’ performance in financial perspective and that size, and credit risks have a positive but insignificant relationship with DTMs’ performance in financial perspective. The study concluded an existence of an inverse relation between credit information sharing and DTMs’ performance in financial perspective. The study also concluded that there is a direct relation between size, credit risk and performance if financial perspective that there is an adverse effect between poor management and DTMs’ performance in financial perspective. The study recommended that managers of Deposit Taking Microfinance’s should ensure that they invest more resources in credit information sharing. The study also recommended that the manager of deposit taking microfinance’s should institute effective credit management and control strategies to ensure that they mitigate the effects of credit risk.