The Relationship Between Outreach and Financial Sustainability of Microfinance Institutions in Nairobi County

Abstract

Several micro finance institutions (MFIs) are operating with the key objective of giving credit services to the poor. In light of this, this paper attempted to look at MFIs financial in Nairobi County with key focus on outreach and financial sustainability. The paper has been compiled with the use of data obtained from secondary sources. The purpose of this study was to investigate the relationship between financial sustainability and outreach of MFIs in Nairobi County. The study was guided by the following research objectives, establishing the relationship between financial sustainability and outreach of MFIs in Nairobi County. A sample of 8 MFIs in Nairobi Countywas selected from Nairobi region. The respondent MFIs used in the study was positively selected from Association of Microfinance report. A cross sectional research design was adopted which involved descriptive, correlation, factor analysis and regression approaches. Findings revealed that there was a significant positive relationship between all the study variables financing strategies, financial sustainability and outreach of MFIs. Results from the regression analysis showed that financial sustainability significantly predicted of outreach of MFIs. The study found that the industry's outreach rose in the period from 2008 to 2012 on average by 12 percent. It identified that whileMFIs reach the very poor, their reach to the disadvantages particularly to women is limited (48.4 Percent on average). From financial sustainability angle, it finds that MFIs are operational sustainablemeasured by return on asset is improving over time The paper recommends that MFIs should develop appropriate financial strategies that would enable them develop the right proportions of debt to equity putting into consideration the accessibility of these sources of funding and also cost of such funds, adopt adequate professional management of financial constraints so as to increase their capacity to clear debt obligations and continue with operations and also to have various sources of finance other than donor funds in order to improve their financial self sufficiency.