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Nov 20, 2023Keywords:
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Influence of Governance Structure on the Financial Performance of Microfinance Banks in Kenya
Maniagi Musiega
Mary Nelima
Abstract
The study evaluated the influence of governance structure on the financial performance of microfinance banks in Kenya. The theory that ran the research was the agency theory. The study adopted a causal research design that explored cause-and-effect relationships. The study targeted all 14 microfinance banks in Kenya. The census approach was used as the sampling method. Secondary data from Central Bank of Kenya (CBK) and the bank’s website for the period 2018–2022 was used. The data was analysed using descriptive and inferential statistics. Descriptive statistical analysis was used to summarise data using frequencies, skewness, kurtosis, percentages, means, and standard deviations. The analysed data were presented in the form of tables and models for ease of comparison and inference. From the findings, the estimated coefficient of governance structure was significantly not equal to zero (β = 0.639906, t = 2.30, p-value = 0.034), implying that a unit increase in governance structure would cause the levels of financial performance to increase by 0.639906 units. Governance structure accounted for 16.08% (overall R square = 0.1608) of the variation in financial performance of microfinance banks in Kenya. The suggestions derived from these data suggest that throughout the process of board member selection, shareholders should prioritise the inclusion of individuals from varied professional backgrounds. This approach is anticipated to yield a broader range of perspectives on various topics.
