A Survey of Use of Financial Performance Indicators by Microfinance Institutions in Kenya

Abstract

This study focused on the assessment of the use of financial performance indicators among the microfinance institutions in Kenya. All the interviewed institutions are located in Nairobi. The study had two main objectives. First, to assess the indicators of performance used by the MFls in Kenya, and secondly, to establish whether there is any relationship between the sources of finances and the financial performance indicators used by these MFIs. Data was collected by use of a questionnaire and was analyzed by use of Excel and SPSS. The results were tabulated in the form of frequencies and percentages. The research revealed that all the MFls in Kenya use financial performance indicators. Some financial performance indicators like Arrears Rate, Delinquent Borrowers, Portfolio At Risk among others were more frequently used. Further analyses revealed that majority ofthe MFls have their financial indicators of performance determined by their financiers. This was confirmed by a Chi-Square test (X2) at 95% confidence level. The value of the calculated X2exceeded the value ofX2 at the critical point and thus the null hypothesis was rejected. This lead to a conclusion that we are 95% confident that there is a relationship between the financial performance indicators used and the sources of finance. The relationship being the providers of finance determine the financial performance indicators the MFls in Kenya use.