Publication: Barriers Faced by Micro Finance Institutions in the Diversification of their Products in Nairobi
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2018
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Mount Kenya University
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Abstract
Today, Microfinance Institutions (MFIs) play an important role in the economic
development of poor communities. MFIs include non-governmental organizations
(NGOs), credit unions, non-bank financial intermediaries, and even a few commercial
banks. The World Bank estimates that there are now more than 7,000 microfinance
institutions, serving some 16 million poor people in developing countries. To the
extent that these MFIs become financially viable, self-sustaining, and integral to the
communities in which they operate, they have the potential to attract more resources
and expand services to clients. The majority of these microfinance organizations
are donor funded, which is an obstacle to their sustainability. Micro credit and
microfinance have changed the lives of people and revitalized communities in the
world. The main objective of the study was to identify the barriers faced by micro
finance institutions in the process of diversifying their financial products. The study
was both qualitative and quantitative where all registered micro finance institutions
in Nairobi was done. Data was collected using both primary and secondary data.
Data was analyzed using Statistical Package of Social Sciences (SPSS), and presented
using tables and frequencies. From the study it was established that the micro finance
institutions faced some barriers. The major barriers were politics and legal policies,
economic and financial social aspect and donor aspect. An important component of
financial sector reforms is the liberalization of interest rates. There is need for a policy
that advocates for better access to capital sources and investment opportunities for
microfinance sustainability, and also encourages MFIs to increase their accessibility,
build capacity, be more transparent, adopt acceptable performance standards, and
promote professionalism that in turn enhances service delivery.
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Microfinance Institutions, Non-governmental organizations, Revitalized communities