Thesis:

Effect of strategic alignment practices on organizational performance of selected micro finance institutions in Meru county Kenya.

One of the most significant challenges affecting the financial sector pertained to issues such as loan non-repayment, a weak legal framework, and ineffective strategies for lender recourse and bad debt recovery. This had particularly impacted microfinance institutions, leading to Non-Performing Loans (NPLs) that diminish profits through credit losses and direct write-offs for loans turning into bad debts, ultimately reducing the funds available for lending. These challenges posed a serious threat to the stability and survival of some Microfinance institutions in Kenya. Recognizing this gap, the research delved into exploring the effect of strategic alignment on the performance of selected microfinance institutions in Meru County Kenya. The study aimed to examine specific objectives, including the assessment of cultural alignment, structural alignment, technology alignment, and resources alignment. Employing a descriptive research design, the study targeted 530 individuals comprising of Senior Managers, Tellers/Field Officers, and Customers of the ten selected Microfinance institutions within Meru County. Using Cochran (1977) formula as adopted by Chaokromthong and Sintao (2021) the study came up with a sample size of 223 respondents who selected randomly to participate in the survey. Primary data was collected using questionnaires, and the semi-structured instrument was pilot-tested by 20 staff from Key Microfinance. The questionnaires were delivered to the respondents' workplaces and subsequently collected for analysis, which involved both descriptive and inferential statistical methods. The research findings were presented through tables, figures, and discussions to facilitate qualitative analysis. Correlation analysis revealed that strategic alignment significantly impacted the performance of commercial banks, as indicated by r values and p-values ranging from 0.5 to 0.9. Among the various dimensions of strategic alignment, organizational structure alignment exhibited the highest r values, indicating the strongest influence on performance, followed by technological alignment, resource alignment, and finally organizational culture alignment, which had the least effect. Moreover, the results suggested that 64.2% of the variations in banks’ performance could be attributed to strategic alignment. The study concluded that the implementation of strategic alignment by microfinance institutions contributed to their enhanced performance. Specifically, fostering a culture of information sharing, employee participation, and engagement, along with a well-organized structure that facilitated division of labor, coordinated work processes, and streamlined communication channels, led to improved performance. Additionally, embracing technological alignment through the adoption of modern banking technologies, investment in new technologies accessible to all staff, and ensuring the availability of financial and human resources under resource alignment further contributed to enhanced bank performance. The implication of these findings is that strategic alignment plays a crucial role in shaping the performance of commercial banks. Therefore, the study recommends that other microfinance institutions across different regions and organizations in various sectors adopt strategic alignment practices to enhance their performance. Furthermore, organizations aiming to improve profitability, market share, and overall satisfaction among customers and employees are advised to incorporate elements of strategic alignment into their operations.