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Article Published In Vol.5 (Nov-Dec-2017)

Customer Credit Protection and Growth of Microfinance Institutions in Bungoma County, Kenya

Pages : 1253-1257

Author : Aggrey Makari Nalianya and Ooko George Oduor

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Financial regulation practices in the management of MFIs leads to customer losing confidence in the ability of a micro-finance to properly manage its assets and liabilities, including deposits, which could in turn trigger liquidity crisis. Therefore, customer credit protection may lead credit controlling being controlled improper where loan awarding procedure may be compromised and embezzlement of fund by MFIs management can be facilitated by poor financial regulatory practices put in place. Therefore, this study is meant to find out the effect of customer credit protection on growth of microfinance institutions in Bungoma County. The study targeted 13 micro-finance institutions in Bungoma with a total population of 143 employees. Census method was employed because of the small number of respondents. Both primary and secondary data were collected. Descriptive and inferential techniques were adopted. Qualitative and Quantitative analysis techniques were employed. Inferential statistic was adopted where regression and correlation analysis were used to test research hypothesis. Frequencies and percentages were adopted. Graphs and charts were used to present data. Correlation results showed that there is a positive and significant relationship between customer credit protections on growth of MFIs. Regression results depicted that customer credit protection contributes significantly to growth of MFIs, that is, an increase in growth of MFIs by 1 units leads to an increase of 0.620 units of use of customer credit protection. The results can be interpreted that, use of customer credit protection leads to growth in MFIs in terms of market shares, shareholders wealth and increase in business value. The study concluded that there is a positive and significant relationship between customer credit protections on growth of MFIs. The study thus recommends that, to increase the growth of MFIs, they should invest heavily on customer credit protection mechanisms which entails; having integrated financial management systems, having customer care desks, periodic auditing, benchmarking with successful firms, staff motivations and having accountable and transparent staff.

Keywords: Customer Credit Protection, Growth of MFIs, County Government, Financial Regulatory Practices



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