The nature of competition within micro finance industry in Kenya.

Abstract

Competition within an industry is one of the factors other than the regulatory, technological, economic, and commercial forces that determine its structure. It puts players into a world in which they have less control than they previously had and which will be characterized by continual change. The Kenyan micro-finance marketplace has evolved at a very rapid pace with new entrants, new products and practice, a rise in movement between micro finance institutions and multiple memberships of financial institutions. The clientele have also become more demanding and discerning. It has many players and competition takes place in many fronts. The purpose of this study was to investigate the nature and basis of the competition in this industry using the Porters' Five Forces model. This study used a descriptive survey design. The population was all the 18 MFIs in Kenya that are members of the Association of Micro Finance Institutions (AMFI). A semi-structured questionnaire was used and quantitative data on the respondents' perception to competition was obtained. The study found out that indeed competition as experienced by the players was reported to exist on all the fronts modeled by Porter. MFIs however did not give due credence to the impact of competition on their chances of success relative to other factors. The study recommended that MFIs pay attention to product development. This can be achieved through proper market prospecting and market research.