A survey of challenges to the growth and development of micro finance institutions in Kenya
The main objective of the study was to establish the challenges influencing the growth and development of micro finance Institutions in Kenya. The survey design was applied across a sample of 25 MFls drawn from within Nairobi region. Cluster sampling was used whereby the Microfinance Institutions in Nairobi were studied, primarily for easy access and affordability to the researcher. The general manager and one micro finance officer were picked as respondents from each of the sampled institutions. The tool used in data collection from respondents was a questionnaire. The questionnaire was preferred because it is free from bias of the respondents. Data analysis was done using descriptive statistics. Quantitative data analysis involved generation of descriptive statistics namely frequencies and percentages. The findings were presented using frequency tables. The key findings from the study were threefold. First, findings established that the MFls are inherently exposed to a number of risks (internal and external) that threaten their financial growth and development. These include: lack of proper collateral to secure loans; failure to obtain insurance for the micro businesses by the clients; liquidity risk; and economic performance risks. The risk of decline in donor subsidies and operational risk seemed to be unpopular among the sample respondents. Further analysis indicated that these risks highly affect the micro-finance businesses by way of exposing them to default risks. Secondly, the findings indicated that loan delinquency has highly affected the growth and development ofMFls. Factors related to loan delinquency include the cost of the loan; the failure by loan officers to put appropriate measures to mitigate against default risks; and the type of financing methodologies applied. The effect of the financing methodology varies depending on whether or not the MFI adopts solidarity group lending; village banking; or individual lending. Thirdly' the key findings identified a number of human resource and institutional factors affecting micro finance businesses. These include low levels of motivation among the micro-finance officers; failure to adequately the loan officers with proper tools to effectively serve clients; and lack of economies of scale based on the institutional capacity and size of the MFls.