| Abstract: |
Microfinance provides strength to boost the economic activities of low-income
earners and thus contributes to eradication of poverty. However, microfinance
institutions face stringent competition from commercial banks; the growth of
microloan activities of commercial banks may confront microfinance
institutions with increased competition for borrowers. In Kenya, the micro
finance sector has extremely high competition indicated by the shifting market
share and profitability. This study sought to examine the determinants of
financial performance of Microfinance banks in Kenya. The study adopted a
descriptive research design and used secondary data from 7 Microfinance banks
for a period of 5 years from 2011 to 2015. The data collected was analyzed
using correlation and regression analysis. The study found a positive and
statistically significant relationship between operational efficiency, capital
adequacy, firm size and financial performance of microfinance banks in Kenya.
However, the study found an insignificant negative relationship between
liquidity risk, credit risk and financial performance of microfinance banks in
Kenya. The study concluded that there is direct relationship between
operational efficiency, capital adequacy, firm size and financial performance
of microfinance banks in Kenya. |