Microfinance Outreach and Financial Sustainability of Micro Finance Institutions in Samburu County, Kenya

By: Martin Wabwire Wafula, Joseph Theuri


The last thirty years between (1987 to 2017) have seen Micro Finance Institutions (MFIs) in Kenya progressively assert themselves among the dominant players in the financial sector particularly by focusing on poverty alleviation and job creation via SMEs which are incidentally associated with the  creation of  approximately 60%  of the jobs in the informal sector. Consequently there has been some improvement in socioeconomic conditions across the country as attested by the improved standards of living for many. The purpose of this study was to investigate the relationship between financial sustainability and outreach of MFIs in Samburu County. The study was anchored on social capital theory, women empowerment theory, governance theory and poverty lending model. The study used primary data collected through questionnaires. The questionnaires were dropped at the respondents’ MFIs and picked later. Secondary data was collected from 6 purposively selected microfinance institutions reporting voluntarily their financial information to the microfinance information exchange portal over the period 2008-2017. Data was subjected to factor analysis. SPSS v22 wasused to run the data. Data was presented by use of frequency distribution tables and bar graphs.Results indicated that many branches had a great influence enabling business to be financially sustainable with minimal risks; this was according to 71% of the respondents. Also 78% indicated that many business outlets ensured that clients are served on time. most respondents indicated by 53% strongly agreed that more women borrowers ensured self-sufficiency and reduced rural poverty more women participation ensured more women opting for entrepreneurship according to 69% of the respondent. The study established that many youth clients’ borrowers enhanced financial sufficiency according to 56% of the respondent who strongly agreed and 36% agreed. In conclusion, the study recommended marketing development and implementation of branch outlets to ensure that clients are served on time and also to ensure efficiency in reaching out to many borrowers.Many women participation should thus be encouraged to participate to increase entrepreneurship in women. Furthermore, access to savings and more loans to youth to ensure entrepreneurship adoption in microfinance institution thus flow in financial sustainability. From the findings 67.3% on financial sustainability of MFI is attributed to combination of the three independent factors (branch network, gender composition, loan to youth) investigated in this study. A further 32.7% of financial sustainability of MFI Kenya is attributed to other factors not investigated in this study. From the regression equation established, taking all the factors (branch network, gender composition and loan to youth) constant at zero, the financial sustainability of MFI would be 1.281. Further, if all the other variables are kept constant, a unit increase in branch network will lead to a 0.603 increase in financial sustainability of MFI. A unit increase in gender composition will lead to a 0.720 increase in financial sustainability of MFI, while a unit increase in loan to youth will lead to a 0.420 increase in financial sustainability of MFI. These results imply that gender composition contribute more to the financial sustainability of MFI followed by branch network, while loan to youth contributes the least to financial sustainability of MFI. There was a strong positive correlation (r=0. 0.577) between the MFI Financial sustainability and the Gender composition which was statistically significant at α=5%, with a P=value of 0.015. The Branch network was the second variable with a positive correlation with MFI Financial sustainability (r=0.308) and statistically significant at α=5%.

Key Words: Microfinance, Microfinance Outreach, Financial Sustainability, Micro Finance Institutions

URL: https://www.ijcab.org/doi-201800180                                                                                     View Full Article

This is an open-access article published and distributed under the terms and conditions of the  Creative Commons Attribution 4.0 International License, United States unless otherwise stated.

About the Authors:

  • Martin Wabwire WafulaCorrespondent Author, Department of Accounting and Finance, Kenyatta University, Kenya
  • Joseph Theuri –  Department of Accounting and Finance, Kenyatta University, Kenya