Factors influencing the growth of micro finance institutions in Nyeri Central Disstrict, Nyeri County Kenya
Maina, Winnie W
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The Kenyan microfinance sector began in the late 1960s and has evolved over time to become commercialized, self-sustaining and hugely profitable institutions with over 100,000 clients. Microfinance is also rapidly becoming Kenya's most accessible and affordable financial service. There has been extensive research carried out on the growth of rural credit lending and the subsidized loan lending by non-governmental agencies in Kenya. However, there is little understanding of the factors influencing the success of public and private micro finance institutions. This research study was conducted in order to study the factors that are responsible for the growth of microfinance institutions. The study was guided by the following objectives: to establish the economic factors influencing the growth microfinance institutions in Nyeri Central District, to find out how growth in information and communications technology has impacted on the growth of microfinance institutions in Nyeri Central District, to find out the marketing strategies employed by microfinance institutions and how these strategies have impacted on growth of the institutions and to establish how the management structures adopted by the micro finance institutions in Nyeri Central District have influenced growth of these institutions. The study adopted a descriptive survey research design to study the factors influencing the growth of the MFls. Random sampling method was used to obtain a representative sample. The informants for the study were drawn from the employees of MFls and the officials of AMF!. Data was collected using questionnaires. Data obtained was analyzed using. descriptive statistics with the aid of Statistical Package for Social science software and the findings were presented in tables. The findings of the study were hoped to be of benefit to the Association of Microfinance Institutions by shedding light on measures which should be taken to in order to improve delivery of micro finance services in Kenya. The researcher hoped that the study would also benefit managers of MFls by providing useful data on the factors that influence the growth of their institutions. The findings showed that economic factors could be contributing to the growth of MFls in Nyeri Central District including low annual turnover hence no enough funds for the high number of borrowers, low number of savers and high number of defaulters. It was also found out that all the MFls are using technology. However, most of the MFls' technology is not up to date. The challenges related to ICT include resistance to change among the employees, lack of funds to finance newer technology, and lack of technical skills to handle new technology. MFls may not fully benefit from technology when it is not up to date additionally; it was found out that most of the MFls do not carry out market research. The main reason for the same was due to lack of finances to facilitate the same. MFls experience the following other problems in the course of marketing; inadequate travel time to clients, lack of business opportunities, lack of basic infrastructure and inadequate information about clients. Failure to carry out market research could deny the MFls the chance to improve on their products and services, get new markets, and learn customer complaints all of which would hamper their growth. Finally, the management of most MFIs was found to be centralized since most crucial decisions are made at the home office. Employees are only involved in decision making through meetings with the management and through the suggestion box. Management was found to be authority based and this affects the institutions negatively. Based on the findings of the study, the researcher recommends that MFIs should regard the employees more highly because they are the ones who deliver the services. They should consider their welfare because satisfied employees are likely to give quality services which would help attract new customers as well as retain the old ones. These would lead to growth of the MFls.