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Effect of Deposit Mobilization on Financial Perfomance of Deposit Taking Micro Finance Institutions in Nairobi Central Business District, Kenya
Microfinance Institutions borrow from the repo market at a rate that is even higher which pushes cost for MFIs. Consequently, the effect of deposit mobilization on financial performance of MFIs remains an empirical issue especially in the context of Kenya where there exists limited empirical evidence on the same. Financial performance of Deposit taking MFIs in Nairobi has not been steady, yet deposit mobilization initiatives have been on the rise. Hence, the purpose of the study was to determine the effect of mobilization of deposits on financial performance of Deposit Taking Micro Finance Institutions in Nairobi central business district, Kenya. The independent variables for this study were branch network, capital, regulations and social cultural factors. The study adopted positivism philosophy and descriptive research design. The target population was 9 deposit taking microfinance institutions. The targeted respondents were 45 branch managers and 45 financial officers. Data was analyzed using descriptive analysis and multiple regression analysis with the aid of SPSS. Data presentation was in form of tables and figures. Ethical considerations were observed during the study. The study found that the number of branches has a significant effect on financial performance of the MFIs studied. Capital has a major effect on deposit mobilization. The study found a positive and weak between regulations and financial performance of MFIs. The study concluded that the number of branches has little significant effect on financial performance. Number on branches has not done much to improve customer reach. There study findings document a relationship between the number of branches and the number of customer. Capital was found to have a significant effect on deposit mobilization. Value of equity greatly affects how MFIs performed. MFIs had made significant investments. Retained earnings had a significant effect on financial performance; Similarly, Regulations had significant effect on deposit mobilization and the same had an impact on long term financial performance of MFIs. Social-cultural factors had a significant effect on deposit mobilization. Level of education was the main social-cultural factor affecting deposit mobilization. Consequently, the study concludes that MFIS studied shows the number of branches has not done much to improve customer reach. The value of equity greatly affected how MFIs performed. Areas like internal control impacted on long term financial performance of microfinance institutions. Religion, level of education and gender had no significant effect on financial performance of microfinance institutions.
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