INFLUENCE OF DEBT AND EQUITY RESTRUCTURING ON PROFITABILITY OF MICROFINANCE BANKS IN KENYA
Abstract
Microfinance banks are the key micro financing institutions for mobilization of financial resources for various development activities and where instability in the Microfinance banks exists. Financial restructuring is key in turning it round to stability and profitability. This study investigated the influence of debt and equity restructuring on profitability of microfinance banks in Kenya. Loanable funds Theory and market timing theory. A descriptive research design was adopted. This study was based on 13 microfinance banks in Nairobi County. This study covered a 5 year period from 2016 to 2020. The research adopted the use of secondary data. The secondary data was obtained from CBK registry comprising of audited financial statements submitted by the microfinance banks. This study used autocorrelation tests, heteroscedasticity tests, multicollinearity tests, normality assumptions and Hausman test to evaluate the data collected before the actual analysis. The findings indicated that a positive and significant effect of Debt Restructuring and equity restructuring on the profitability of microfinance banks in Nairobi County. This implied that an increase in equity restructuring and Debt Restructuring leads to a significant increase on the profitability for the microfinance banks in Nairobi County. The study recommended that the Microfinance Banks management should formulate a mechanism to raise their lending capacity by periodically increasing their minimum member deposits. This will increase the liquid cash for lending which is the core activity of the Microfinance Banks.
Key Words: Debt, Equity Restructuring, Profitability, Banks
CITATION: Milimu, E. A., Miroga, J., & Otinga, H. (2022). Influence of debt and equity restructuring on profitability of microfinance banks in Kenya. The Strategic Journal of Business & Change Management, 9 (1), 558 – 570.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i1.2203
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