INNOVATION STRATEGIES AND PERFORMANCE IN MICROFINANCE INSTITUTIONS IN KENYA

Caroline Njoki Kariuki, Dr. Robert Mangana

Abstract


Currently, the performance of MFIs in Kenya reflects their significant impact on the financial sector and broader economy. According to data from the Central Bank of Kenya, as of recent years, MFIs collectively manage a substantial portfolio of loans and deposits, demonstrating their growing importance in the financial market. The general objective of the study was to assess the influence of innovation strategies on performance in microfinance institutions in Kenya. Specifically, the study sought to assess the influence of product innovation on performance in microfinance institutions in Kenya and to determine the influence of process innovation on performance in microfinance institutions in Kenya. The study adopted descriptive research design. According to the CBK report (2023), there are twelve licensed MFIs in Kenya. These include Choice Microfinance Bank, Faulu, Kenya, Women Microfinance bank limited, SMEP, REMU, Rafiki, Uwezo, Century, Sumac, U&I, Daraja and Caritas. There are 5 wholesale MFIs, 9 deposit taking MFIs and around 36 Retail MFIs. The target population was therefore 258 management employees working in twelve licensed MFIs in Kenya. The Yamane formula was adopted to calculate the study sample size. Therefore, the study sample size was 157 respondents. Primary data was obtained using structured and semi-structured questionnaires. Quantitative data collected was analyzed using descriptive statistical techniques which are frequencies, mean, standard deviation. Inferential statistics which include Pearson correlation and the Regression Analysis Model was used to test the relationship between study variables. Data was analysed using Statistical Package for Social Sciences (SPSS) software version 26. The study concludes that product innovation has a positive and significant effect on performance in microfinance institutions in Kenya. In addition, the study concludes that process innovation has a positive and significant effect on performance in microfinance institutions in Kenya. Based on the findings, the study recommends that the management of microfinance institutions should develop tailored digital financial solutions that address the specific needs of underserved communities. By implementing mobile-based platforms that offer microloans, savings accounts, and insurance products, MFIs can increase accessibility and convenience for clients in remote areas.

Key Words: Innovation Strategies, Product Innovation, Process Innovation, Performance in Microfinance Institutions


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