| dc.description.abstract | Microfinance Institutions (MFIs) in Kenya have been experiencing increase in losses in
the last three years. Central Bank of Kenya (CBK) reported a total asset decline of 8.8%
in 2023. That is from Kshs 70.4 billion to Kshs.64.2 billion in 2022 and 2023
respectively. Further, there was a loss of Ksh 980 million in 2022 from 877Millions in
2021. This was occasioned by decline in customers deposits from Ksh 50.4 billion in
2021 to Ksh 46.5Billion in 2022. This also affected the value of asset quality which
increased the gross non-performing loans from Ksh 12.3Billion in 2021 by Ksh 2.4
billion in 2022. The overall objective of this study was to; examine the effect of current
asset management on financial performance of licensed MFIs in Kenya. The specific
objectives were to determine the effect of cash management, debtors’ and the moderating
effect of firm size on current assets management and financial performance of licensed
MFIs in Kenya. The study was guided by theories like resource-based, shift ability, and
debt management. The study adopted descriptive survey and causal research design.
Yamane (1967) formula was used to derive to a sample size of 100 from a population of
134 respondents in 13 registered microfinance Institutions (MFIs). Both primary and
secondary data were collected by use of questionnaires and document analysis of
financial reports after piloting was done in Muungano MFI. A Cronbach Alpha of 0.895
was obtained after testing for reliability. Construct validity was tested by factor analysis
which indicated a rotation value of 0.766. The study’s findings revealed that only two
MFIs U&I and Sumac had positive Return on Asset (ROA) of 2% and 1% respectively.
The study concluded that cash management and debtors’ management had an influence
on financial performance. Additionally, firm size had a moderating influence on current
asset management and financial performance. The study concluded that though the MFIs
had adequate assets, they did not have adequate cash at hand to support banking
operations like withdrawals and lending. This was partially attributed to inefficient
expense tracking systems such that the available funds were poorly accounted for.
Notably, the study established that the value of assets was irregularly growing with the
exception of three MFIs that registered consistency in growth of assets. The, study
recommends that the management of MFIs should restructure their products and services
to a more reliable customer experience perspective, in order to improve cash at hand to
support its operations. The study’s recommendations were that the management of MFIs
should develop policy framework on the need to strictly adhere to the improved system;
The MFIs management should develop procedural policies such that appraisal of
potential borrowers is not made a branch level affair; The management should develop
long-term financing strategies to incorporate more products and services. | en_US |
