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Brenda Moraa Nyamasege - Masters Student, Kenyatta University, Kenya

Dr. Vincent Shiundu. Mutswenje (PhD) - Lecturer, Department of Accounting and Finance, Kenyatta University, Kenya


Microfinance banks are key financial intermediaries due to their ability of providing credit facilities to the unbanked population. The Kenyan Microfinance banking institutions have been undergoing declining run on their financial performances. One of the stable microfinance banks which is Faulu Microfinance was acquired in the year 2013 by Old Mutual holdings. The ROA, NIM and ROE of these banks have been characterized by decreasing figures from the year 2016. Consequently of this poor trend in the financial performance of these banks, this inquiry sought to evaluate firm characteristics effect on microfinance banking institutions finance performance in Kenya. The achievement of this objective is specifically achieved on the basis of; liquidity, management efficiency, credit size and bank age influence on Kenyan microfinance banking establishments finance performance. The theoretical underpinning of the study was Efficiency Structure Theory, Financial Intermediation and Liquidity Management Theory. Descriptively, the study design was applied to thirteen microfinance banks reached through a census sampling approach for the period of 2013 to 2019. Secondary data on the banks operational activities was obtained through secondary data collection pan. The evaluation of the study was made possible through panel and descriptive techniques of analysis where various diagnostic tests were applied. Due ethical standards were adequately followed. The outcome of the investigation noted that with significantly effect, liquidity negatively affected financial performance; management efficiency affected financial performance positively in a manner that is insignificant; credit size possessed inversely affected financial performance but in an insignificant way; and bank age affected the microfinance banks’ financial performance in an insignificant but positive way in Kenya. The inquiry suggested that to improve the financial performance of Kenyan banks, the management of microfinance banks should strengthen the management of their liquidity to avoid funds that would be retrieved to the banking circle.

Full Length Research (PDF Format)