ISSN E 2410-3500

Dynamic Capabilities and Performance in the Context of Microfinance Institutions in Kenya: An Exploratory Study


Vol. 7, Issue 08, PP. 15-29, August 2020


Keywords: Business Regulatory Environment, Dynamic Capabilities, Micro Finance Institution, Performance, Strategic Choice

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Micro Finance Institutions in Kenya contribute greatly to the economic growth. They offer financial services to the poor in the society and people who can’t afford commercial bank services. Licensed MFIs in overall recorded a 7% decline in assets as at 31 December 2017 contrary to a 5% growth that was witnessed in 2016. Repayment default, market mean sustainability, government regulations, financial sustainability policies, and funding have been the major challenges faced by MFIs. The study will thus have six objectives; to examine the effect of absorptive capability on performance of MFI in Kenya, ; to examine the effect of adaptive capability on performance of  licensed MFIs in Kenya, ; to examine the effect of innovative capability on performance of MFI in Kenya, ; to examine the effect of networking capability on performance of MFI in Kenya, to examine the mediating effect of strategic choice on the relationship between dynamic capabilities and performance of MFI in Kenya and to examine the moderating effect of business regulatory environment on the relationship between dynamic capabilities and performance of  licensed MFIs in Kenya. The study will be based on various theories; resource based view, dynamic capabilities view, theory of strategic choice, institutional theory and balanced score card. Resource based view will be the main theory to anchor the study. Empirical studies on the various variables will be reviewed. The study will adopt positivist approach and combined descriptive and explanatory cross sectional research design will be used. The target population will comprise 13 licensed MFIs in Kenya between the year 2017 and 2018 with four functional areas from each. A census of the licensed MFIs will be done to analyse the data. Primary data will be collected using semi-structured self-administered questionnaires for both quantitative and qualitative data. Secondary data will be collected from AMFI published reports, financial reports published by MFIs and Central Bank of Kenya reports on MFIs between 2017- 2018. Face, content and construct validity will be ensured through expert opinions and pilot testing. Reliability test will be through use of Cronbach’s alpha score at the level of 0.7. Descriptive statistics includes mean scores, standard deviations, percentages, and frequency distribution will be used to analyse the data. Mutiple regression will further be done and coefficient of determination (R2) will be used to establish the statistical significance of the regression models. Significance level of 0.05 will be used.

Victor Muithya, Department of Business Administration, School of Business, Kenyatta University, Kenya.

Stephen Muathe, Department of Business Administration, School of Business, Kenyatta University, Kenya.

Victor Muithya Stephen Muathe Dynamic Capabilities and Performance in the Context of Microfinance Institutions in Kenya: An Explo International Journal of Business Economics and Management Works Vol. 7 Issue 08 PP. 15-29 August 2020.

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