The Effect of competition on Financial performance of Deposit taking Microfinance Institutions in Kenya

Abstract

Over the last five years, the country has witnessed a tremendous increase in the number of the Deposit Taking Microfinance Institutions. The objective of this study was to find out whether there exists a relationship between competition and the financial performance of Deposit Taking Microfinance Institutions in Kenya. The study involved collecting secondary data from the individual Deposit Taking Microfinance Institutions and the Association of Microfinance Institutions in Kenya. Consequently data for nine DTMFIs was analyzed for five years (2010-2014) using multivariate regression model. The study found out that a strong relationship exists between competition and financial performance of DTMFIs. To test the significance of the findings, chi –square test was done. The research recommends that DTMFIs should judiciously venture into innovative products to improve their financial performance since it has a positive effect on their financial performance and also recommends for income source diversification