The Relationship Between Product Diversification and Financial Performance of Deposit Taking Microfinance Institutions in Kenya.

Abstract

The objective of the study was to determine the relationship between product diversification and financial performance of deposit taking Microfinance institutions in Kenya. The study was done through the sample of the 9 microfinance institutions that had been registered by Central Bank of Kenya before the end of financial year 2012 and have constrantly existed between 2012 nad 2015. The data collected was cleaned before uploading to the Statistical Package for Social Sciences (SPSS) for the purpose of analysis. The data was analyzed using data analysis techniques which included descriptive statistics like the standard deviation, mean, minimum and maximum. In addition, inferential statistics like regression analysis were also used to establish the relationships between the dependent and independent variables. The Herfindahl-Hirschman Index (HHI) was used and analyzed using a Regression model whose results showed that, microfinance institutions are moderately diversified with mean diversification index (HHI=0.17). The study recommended that microfinance institutions should extend their product mixes to increase the performance through combination of non interest activities and innovative customer focused products that ride on existing technology.