Effect of Corporate Governance Practices on Financial Return of Deposit Taking Micro Finance Institutions in Kenya

Abstract

Micro-finance institutions' financial returns were examined to see whether corporate governance standards had an impact. Corporate governance procedures have an influence on the return on equity and risk management of deposit accepting micro financial institutions in Kenya, according to the research goals of the study. DTM supplied the data for a cross-sectional survey that was utilized in this study. An investigation of corporate governance in a DTM, the information acquired was meant to explain, examine and quantify major concerns related to governance difficulties affecting MFIs and their influence on MFIs' performance. All the 9 fully licensed deposit taking micro financial institutions in Kenya as at December 2015 were involved in the study. CEOs and Deputy CEOs from each DTM of the 9 DTM were used which made a total of 18 respondents interviewed. The main and secondary data was both qualitative in character. Deposit-taking micro-finance institutions' financial returns may be predicted using a multivariate regression model that incorporates corporate governance. Mean, standard deviation and variance were used in this study's analysis for the aim of drawing conclusions. Finally SPSS version 22 was used in data. The study established that that the DTMs were well networked with numerous branches in Kenya; that accepting deposits, giving loans at an interest and Offering financial advice were the main services offered by these organizations. The selection and composition of board members was based on gender balance, each board member and executive director had a plan for their departure, and two-thirds or more of the board members were entirely independent non-executive directors. The study recommends that the DTMs that combines the functions of the chairman and CEO should separate them because this helps in controlling conflict of interest and at the same time overlapping of functions and that the organizations with large board of directors reduce the number so that to make the process of making decisions shorter because it removes so much complexities.