Financial Inclusion and Financial Performance of Microfinance Institutions in Kenya

Abstract

The levels of financial inclusion in Kenya have continued to increase due to robust financial structures that have seen the number of MFIs grow. These MFIs contribute immensely in creating seamless flow and access of affordable financial products to the common people at the bottom of the pyramid. But despite their huge contribution, many of these MFIs still struggle to stay afloat. It remains unclear whether such growth in the financial levels contributes to the financial performance of such firms. Therefore, this research work provides theoretical and conceptual background on the relationship between financial inclusion and the financial performance of MFIs in Kenya. It uses total loan value and deposit accounts to measure financial inclusion levels and data collected from the 14 registered deposit-taking MFIs. However, from the regression analysis done, the paper concludes that, indeed, financial inclusion does not guarantee financial performance. Therefore, the study indicates the need to have empirical research to identify the contributors to the proper financial performance of MFIs.