Effect Of Corporate Governance Practices On Financial Performance Of Government Managed Micro Finance Institutions In Nairobi Cosmopolitan, Kenya

Abstract

This paper discussed the effect of corporate governance practices on financial performance of Government managed MFIs (MFI) in Kenya. The main focus of the study dwelt around three MFIs that is Uwezo fund, Women enterprise fund and Youth enterprise fund. The general objective of the study was to determine the effect of corporate governance practice on financial performance of Government managed MFIs in Kenya. Good governance practices in terms of accountability, managerial responsibility, companies’ governance problem, weak Board of Directors (BODs) and protecting minority shareholders and investor were proposed as key elements in the literature in relation to MFIs performance. Sound corporate governance practices is increasingly becoming more important because for the demand for accountability and transparency of funds utilized in MF activities. The study targeted all government managed MFIs in Nairobi Cosmopolitan. The research used a descriptive cross-sectional survey. Questionnaire were used as a research instrument which encompassed both open and closed ended questions in order to collect primary data. The research data collected was edited then coded categorized and keyed into Statistical Package for Social Sciences (SPSS) for the final data analysis. Descriptive analysis together with frequencies, mean and percentages was applied in profiling the respondents. Regression analysis was used to establish the relationship between the independent and dependent variables. The study drew conclusions on the MFIs corporative governance practices in terms of governance structure, independent BOD and board composition had a positive and significant influence on financial performance. The study recommends that for MFIs to realize better financial performance, policy makers must pay attention to the MFIs governance structure.