MACRO ECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF DEPOSIT TAKING MICROFINANCE INSTITUTIONS IN MOMBASA COUNTY
Abstract
The purpose of the study was to investigate the effect of macroeconomic factors affecting financial performance of deposit taking microfinance institutions in Mombasa County. The target population of the study was 64 senior staff from six deposit taking microfinance institutions operating in Mombasa County and registered with the central bank of Kenya. The study utilized both primary data and secondary data. Primary data was collected by use of structured questionnaires while ssecondary data was collected from financial data obtained from the Central Bank of Kenya periodicals. The collected data was analysed, summarized and tabulated by use of SPSS software version 25. Descriptive analysis and inferential analysis were used to summarize the results for each of the study objectives. The study findings established that there was a significant relationship between national savings rate and financial performance of deposit-taking micro finance institutions. The study also found that there was a negative contribution of inflation to the financial performance. The regression results also established that there was a significant relationship between exchange rate and interest rate on financial performance of deposit-taking micro finance institutions. The study concluded that the financial performance of deposit taking MFIs are positively affected by national savings. This implied that the more the public save, the high the performance of DTMFIs improves and vice versa. The study concluded that microfinance resorts to credit rationing during inflation period and capital formation has affected by inflation thus affecting intermediary activity. It was concluded that central bank monetary policies during inflation impacts microfinance institutions. The study concluded that interest rate was competitive to attract customers and that interest rates set were dictated by central bank rate. The study recommended that deposit taking MFIs management should lobby the CBK to enact policies which will end up stimulating public to save as this was found to positively affect financial performance of deposit taking MFIs. The study recommended that the management of deposit taking MFIs should set interest rate level for both lending and deposits which is competitive so as to attract more customers and lead to improved performance.
Key Words: Gross National Savings, Exchange Rate, Inflation Rate, Interest Rate, Financial Performance
CITATION Swaleh, C., & Wekesa, M. (2020). Macro-economic factors and financial performance of deposit taking micro-finance institutions in Mombasa County. The Strategic Journal of Business & Change Management, 7(3), 757 – 775.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i3.1705
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