ASSET LIABILITY MANAGEMENT AND FINANCIAL PERFORMANCE OF MICROFINANCE BANKS IN NAIROBI COUNTY
Abstract
This study investigated the effect of asset liability management on the financial performance of Microfinance Banks in Nairobi County, Kenya. The study was guided by Liquidity Preference Theory. Adopting a descriptive correlational research design, the study targeted senior managers, financial analysts, credit officers, and internal audit personnel from large, medium, and small MFBs in Nairobi County. Stratified random sampling ensured representativeness across these categories, while data collection combined structured questionnaires and secondary data sheets. Analytical methods included both descriptive and inferential statistical tools, with SPSS version 29 utilized for robust data processing and hypothesis testing. The findings revealed a significant positive relationship between asset-liability management and financial performance, demonstrating the criticality of aligning assets with liabilities to mitigate risks. The study underscores the importance of tailored asset liability management for enhancing financial sustainability in the microfinance sector. The study recommended that microfinance banks strengthen asset liability using advanced tools and dynamic forecasting. Future research could investigate how incorporating machine learning and blockchain into asset management affects financial performance. Additionally, research could examine the long-term impact of macroeconomic factors (inflation, interest rates) on asset management strategies and the influence of ESG factors on these practices, considering the growing importance of sustainable finance.
Key Words: Assets Management, Liability Management, Microfinance Banks
CITATION: Otieno, B. A., Kithinji, M., & Miluwi, J. (2025). Asset liability management and financial performance of microfinance banks in Nairobi County. The Strategic Journal of Business & Change Management, 12 (2), 1387 – 1402. http://dx.doi.org/10.61426/sjbcm.v12i2.3279
Full Text:
PDFReferences
Amira, E. A. (2023). Asset-liability management and financial performance of commercial banks in Kenya (Doctoral dissertation, MMUST).
Anggono, H. (2020). The determinant factors of asset and liability management and the bank performance: empirical study on foreign exchange commercial banks in Indonesia from 2011 to 2016. International Journal of Business and Globalisation, 19(4), 512-527.
Banjo, K. A., & Oyetade, J. A. (2022). Improving the Financial Performance of Life Insurance Industry in Nigeria Through Effective Asset–Liability Management. Nigerian Journal of Risk and Insurance, 12(1), 57-76.
Bhardwaj, A., Siddiqui, A., & Alharbi, A. A. (2021). Strategic decision making in organizations: A systematic literature review and future research agenda. Journal of Business Research, 137(12), 244-257.
Chen, J., & Lee, Y. (2022). The interplay of moral purpose, vision, and goals in shaping organizational strategy. Strategic Management Journal, 28(2), 301-315.
Cherono, H., & Kavale, S. (2021). Effect of firm size on financial performance of microfinance institutions in Kenya; A case of Mombasa County. The Strategic Journal of Business & Change Management, 8(1), 405-420.
Echwa, J., & Murigi, P. (2022). The impact of organizational culture on employee retention and attraction: A review of literature. Journal of Human Resource Management, 19(3), 278-293.
Garcia, M., & Lopez, T. (2023). The relationship between credit risk management and bank profitability in the European banking sector. European Financial Management Journal, 19(3), 234-256.
Gupta, A., & Sharma, R. (2021). Asset quality monitoring and financial performance: A study of Indian banks. International Journal of Financial Studies, 12(3), 180-200.
Jones, P., & Smith, A. (2023). Leveraging strategic alignment for organizational adaptability: The role of dynamic capabilities. Journal of Strategic Management, 22(1), 78-92.
Kabetu, J. K., Muturi, J., & Kimathi, M. W. (2021). Strategic decision making and organizational success: A review of the literature. International Journal of Management Sciences and Business Research, 10(4), 112-125.
Karanja, J., & Muturi, W. (2021). Credit risk management practices and financial performance of microfinance institutions in Kenya. International Journal of Financial Studies, 9(3), 150-168.
Kim, H., & Lee, J. (2022). Diversification benefits in real estate investment trusts: Evidence from a multivariate GARCH model. Real Estate Economics, 50(3), 567-589.
Kumar, S., & Reddy, P. (2024). Effect of asset quality monitoring on financial performance: A case study of manufacturing firms in India. Journal of Operations Management, 33(1), 158-177.
Lee, H., & Kim, J. (2022). Impact of asset quality monitoring on the financial performance of insurance companies: Evidence from South Korea. Journal of Risk & Insurance, 91(9), 185-192.
Lola, F., & Paul, S. (2022). Strategic decision making: Challenges and opportunities for organizational success. Journal of Strategic Management, 8(3), 145-160.
Mweu, L. K. (2022). Effect of Asset Liability Management Strategies on the Financial Performance of Commercial Banks in Kenya (Doctoral dissertation, University of Nairobi).
Nguyen, H., & Tran, T. (2023). Asset quality monitoring and financial performance: Evidence from listed companies in Vietnam. Journal of Financial Regulation & Compliance, 19(3), 234-256.
Njue, A. (2020). Liquidity management and financial performance of microfinance institutions in Kenya (Doctoral dissertation, University of Embu).
Nyabiba, J. K., & Kimani, E. M. (2023). Portfolio Diversification and Financial Performance of Microfinance Institutions in Nairobi County, Kenya. International Journal of Finance, 8(2), 90-113.
Nyong’a, M. E., & Maina, J. W. (2022). The role of clear objectives in strategic decision making: A review of the literature. International Journal of Management and Commerce Innovations, 10(2), 89-102.
Ofori, E., & Abor, J. (2022). Credit risk management and financial performance of non-bank financial institutions in Ghana. Journal of Risk Finance, 23(2), 101-118.
Olowokudejo, F., & Akindipe, O. E. (2022). An exploratory study of asset liability management in the insurance industry in Nigeria: A panel approach. Acta Universitatis Danubius. Œconomica, 18(4), 123.
Pasaribu, S. P., Azzahra, S., & Lestari, M. (2021). Resource allocation in strategic decision making: A systematic literature review. Journal of Economics and Business Management, 9(2), 78-92.
Paul, S., & Musiega, M. (2020). Effect of credit risk management practices on financial performance of micro-finance institutions in Nairobi. International Journal of Recent Research in Social Sciences and Humanities, 7(3), 22-39.
Schein, E. (2021). Organizational culture and leadership: A dynamic view. San Francisco, CA: Jossey-Bass.
Smith, J., Thompson, A., & Williams, R. (2020). The benefits of sectoral diversification: An empirical analysis of global equity indices. Journal of Financial Markets, 45(12), 123-142.
Wang, Q., Li, H., & Zhang, Y. (2023). Asset quality monitoring and financial performance: A study of real estate investment trusts in the United States. Real Estate Economics, 50(12), 67-89.
Williams, M. N., Grajales, C. A. G., & Kurkiewicz, D. (2020). Assumptions of multiple regression: Correcting two misconceptions. Practical Assessment, Research, and Evaluation, 18(1), 11.
Wilson, K., & Harris, M. (2022). The influence of organizational culture on performance: A comprehensive review. Journal of Management Studies, 48(3), 321-336.
DOI: http://dx.doi.org/10.61426/sjbcm.v12i2.3279
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.