EFFECT OF BOARD DIVERSITY ON FINANCIAL PERFORMANCE OF MICRO FINANCE INSTITUTIONS REGULATED BY SASRA IN KENYA

MUCHIRI DENNIS MUCHURI, DR KIMUNGUYI SAMMY

Abstract


Micro Finance Institutions (MFIs) rejuvenate economic prowess in developing countries, they are a promising tool to tackle poverty and improve food security. Sustainability of MFIs based on their corporate governance to ensure that their objectives and missions in poverty eradication are sustainable. The study focused on effects of Corporate governance on Financial performance of Microfinance Institutions in Kenya over a period of eleven years from 2005-2016. The study was necessitated by the lack of documented literature on effect of board diversity on financial performance of micro finance institutions regulated by SASRA in Kenya. The relevant literature was reviewed for the purposes of this study. Descriptive design was used in trying to establish the causal effect relationship between board diversity and the financial performance of the MFIs regulated by SASRA in Kenya. The target population was the 163 Licensed Micro Finance Institutions under the umbrella body SASRA where a sample size of 116 Microfinance Institutions was selected using stratified sampling technique. Data was collected from both primary sources and secondary sources based on availability and accessibility. Primary data was captured using structured questionnaires completed by CEOs with the help of management team as they were in a better position to comment on corporate governance affairs. Secondary data was collected from the financial reports, newsletters and brochures which is the most reliable source of microfinance financial data. The study found that board diversity is statistically significant to financial performance. The study concluded that board size board diversity is positively related to financial performance micro finance institutions. The organization should ensure that their board members are independent. This can be done by ensuring that the management does not interfere with the board activities and does not act in any way to influence the decisions made by the board.


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