The Relationship Between Financial Sustainability and Outreach of Microfinance Institutions in Kenya

Abstract

Microfinance institutions have grown in the last few years and are now under the spotlight of development experts due to their stellar performance in making credit access to the poor easier. However the performance of MFIs is based on the two concepts, outreach and sustainability. MFIs indeed need to be self-sustaining if they are to achieve their outreach goal of providing financial services to the poor. The objectives of this study were to identify the levels of financial sustainability, assess the levels of depth of outreach of the microfinance institutions in Kenya and establish the relationship between sustainability and outreach. This study adopts a descriptive survey design approach to identify what levels of financial and depth of outreach has been achieved. A sample of 30 MFIs was selected. Regression model was also used to establish the relationship between sustainability and outreach. The findings of this study portray that the increase in branches, average number of active clients and the high percentage of women clients has enabled achievement of a greater depth of outreach. This greater depth of outreach has then greatly influenced the financial sustainability of MFIs. It also shows a positive correlation between outreach and financial sustainability. Finally the study concludes that there is a strong relationship between financial sustainability and outreach of MFIs in Kenya.