EFFECT OF FINANCIAL RISK ON FINANCIAL PERFORMANCE OF MICRO FINANCE INSTITUTIONS IN KENYA
Lelgo Kibyegon Josphat - Masters Student, Jomo Kenyatta University of Agriculture and Technology, Kenya
Obwogi Joseph - Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Financial risk management is at the epicenter of modern management of financial institutions. With the growing number of financial institutions in Kenya being put under receivership owing to serious financial management problems, this study sought to establish the effect of financial risk on financial performance of Micro finance Institutions in Kenya. The study adopted a quantitative research design. The target population were the 13 registered Micro finance institutions as licensed by the Central Bank of Kenya as at 2018. The study was based on secondary data retrieved from the MFIs’ annual financial reports spanning 5 years between 2013 and 2017. The study was based on quantitative data. The study recommends that the micro finance institutions should review their credit rating policies in order to improve the performance and reduce non-performing loans. In addition, to enhance their liquidity position, the micro finance institutions should maintain a sound level of current assets that is able to effectively cover their short-term obligations when they fall due.
