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Article Published In Vol.4 (Sept-Oct-2016)

Nonperforming Loans and Financial Performance of Kenya Women Finance Trust in Kenya

Author : Mr. Agoi Kenneth Mung`aho, Dr. Ondiek B. Alala and Mr. Albert Odhiambo

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The social intermediation mission of microfinance has swiftly turned into commercialized direct banking via deposit taking microfinance with Central Bank of Kenya as the regulator. These institutions receive deposit from customers hence the risks that go with banking have caught up with them. The study focused 10 years from 2006-2015 and used descriptive research methodology that enabled presentation of information as it is currently. Primary and secondary data collection research methods were used in order to bring out both qualitative and quantitative aspects for variable analysis. The study employed a census method to get responses from 33 management employees of KWFT Kenya which included 7 senior employees in management and 26 operational employees from different departments to whom the questionnaires were administered of which 33 were filled and returned giving a 100% return rate. Questionnaires, interview schedules and document analysis were used for data collection. Validity and Reliability of the research instrument was observed using a test-retest method. Computed Cronbach`s alpha reliability of research instruments was 0.761 which was above the threshold of 0.7 that is acceptable in social sciences` research. Data collected was analyzed through descriptive and inferential statistics using SPSS version 20 and Eviews 9.5. Analysis of variance test was conducted so as to determine variability and model a relationship between risk and financial performance of Kenya Women Finance Trust. Data was presented through lag plots, tables and correlograms. Regression analysis modeled a causal relationship between variables and the findings confirmed that exposure through nonperforming loans reduced returns. It is therefore recommended that the firm should tighten the monitoring of its credit policy in order to enhance financial performance.

Keywords: Nonperforming loans, Return on assets, Financial Performance.

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