Influence of micro economic factors on financial sustainability of informal finance groups in Kiharu constituency-Kenya
PDF

Keywords

Macro-economic, Financial Sustainability, Informal Finance Groups

How to Cite

Mutegi, E., Kiai, R., & Maina, E. (2020). Influence of micro economic factors on financial sustainability of informal finance groups in Kiharu constituency-Kenya. International Journal of Research in Business and Social Science (2147- 4478), 9(1), 88-93. https://doi.org/10.20525/ijrbs.v9i1.528

Abstract

This article considers the influence of macro-economic factors as integrated factors in financial sustainability of Informal Finance Groups. Informal Finance Groups (IFGs) have become critical in poverty eradication around the world in enhancing access to finance. Despite acknowledgement of this fact, IFGs have been faced with financial constraints as a result of micro factors that affect them. This puts the financial sustainability of the IFGs at risk.  In this study, financial instability in informal finance groups is caused by these factors: loan pricing and loan repayment period. This study required to examine the connection between macro-economic factors and financial sustainability of informal finance groups in Kiharu Constituency in Murang’a County. Both primary and secondary data were collected. Findings indicate that there is relationship between macro-economic factors and financial sustainability of informal finance groups. The R value of 0.238 portrayed a positive linear relationship between the loan pricing practices and financial sustainability of Informal Finance Groups, and the R value of 0.354 portrayed a positive linear relationship between the loan repayment period and financial sustainability of Informal Finance Groups. Therefore the study concluded that the macro-economic factors have an influence on financial sustainability of informal finance groups. The study recommends that the IFGs should devise a standard criteria for optimal pricing of loans to avoid charging exorbitant rates which worsen the poverty situation of the rural residents. Further, the IFGs should also set up loan monitoring systems in place to avoid diversion and defaults.

 

https://doi.org/10.20525/ijrbs.v9i1.528
PDF

References

Adongo, J. & Stork, C. (2015) Factors Influencing the Financial Sustainability of Selected Microfinance Institutions in Namibia, NEPRU Research Paper 39.

Anderson, Siwan & Baland, Jean-Marie & Moene, Karl Ove, 2013. Enforcement in informal saving groups. Journal of Development Economics, Elsevier, vol. 90(1), pages 14-23, September.

Armandriz de A. & Morduch, J. (2015). The Economics of microfinance. Cambridge, MA: MIT Press.

Armendáriz, B. & Morduch, J. (2010). The economics of microfinance. Cambridge, Mass: MIT Press.

Bank, T. & Ledgerwood, J. (2008). Microfinance Handbook : an Institutional and Financial Perspective. Washington: World Bank Publications.

Besley, T. Coate S. & Loury G. (2013). The Economics of Rotating Savings and Credit Associations. The American Economic Review 83: 792-810.

CARE (2012). Village Agent VSLA Performance Surveys, Malawi and Tanzania.

County social services, (2016). Murang’a County, Kenya Social Services Data.

Crowther, D. & Lauesen, L. (2016). Accountability and social responsibility. Bingley, United Kingdom: Emerald.

Deininger, K. and Liu, Y. (2009). Determinants of Repayment Performance in Indian Micro-Credit Groups, Policy Research Working Paper – 4885, World Bank.

Dinçer, H. & Hacioğlu, U. (2014). Global strategies in banking and finance. Hershey, PA: Business Science Reference.

Gonzalez, B. (2014). Access for all : building inclusive financial systems. Washington, DC: World Bank.

Johnson, R. (2008). Lessons from the financial crisis: causes, consequences, and our economic future. Hoboken, N.J: Wiley

Karim, L. (2011). Microfinance and its discontents: women in debt in Bangladesh. Minneapolis: University of Minnesota Press.

Robinson, M. (2012). The Microfinance Revolution Lessons from Indonesia. Washington, D.C: The World Bank.

Sa-Dhan (2008). Tracking Financial Performance Standards of Microfinance Institution. An Operational Manual Technical Tool Series-1 and Sadhan Microfinance Resources Centre. New Delhi.

Schmidt, R., Seibel, H. & Thomes, P. (2016). From microfinance to inclusive banking: Why local banking works. Weinheim, Germany: Wiley-VCH Verlag GmbH & Co. KGaA.

Schreiner, M & Nagarajan G. (2008). Predicting credit worthiness with Publicly Observable Characteristics: Evidence from ASCRAs and RoSCAS in Gambia, Savings and Development, (22) 4, 399-414.

Sebstad, J. Chen G. (2016). Overview of Studies on the Impact of Microenterprise Credit. Report presented to AIMS Project, Washington D.C.

Snodgrass, D. (2016). The Economic, Policy, and Regulatory Environment. AIMS Project Report, USAID, Washington D.C.

Steinwand, D. (2011). The Alchemy of Microfinance: The Evolution of the Indonesian People's Credit Bank (BPR) to 2009 and a Contemporary Analysis. Berlin.

Stiglitz, J. (2009). Selected works of Joseph E. Stiglitz. Oxford New York: Oxford University Press.

World Bank. (2014). Global financial development report. Washington, DC: World Bank.

World Bank. (2018). Global financial development report 2017/2018: bankers without borders. Washington, DC: World Bank Group.

Xing. (2018). Succession and the Transfer of Social Capital in Chinese Family Businesses Understanding Guanxi as a Resource - Cases, Examples and Firm Owners in Their Own Words. Göttingen: Vandenhoeck & Ruprecht, V&R unipress

Authors contributing to IJRBS agree to publish their articles under the Creative Commons Attribution- 4.0 NC license, allowing third parties to share their work (copy, distribute, transmit) and to adapt it, under the condition that the authors are given credit, that the work is not used for commercial purposes, and that in the event of reuse or distribution, the terms of this license are made clear. Authors retain copyright of their work, with first publication rights granted to IJRBS. However, authors are required to transfer copyrights associated with commercial use to the Publisher. The authors agree to the terms of this Copyright Notice, which will apply to this submission if and when it is published by this journal

Submission of an article implies that the work described has not been published previously( exceptin the form of an abstract or as part of a published lecture or academic thesis), that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, it will not be published elsewhere in the same form, in English or in any other languages, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication