Effect Of Competition On The Loan Performance Of Deposit Taking Microfinance Institutions In Kenya: A Case Of Nairobi Region

Abstract

Competition between microfinance institutions (MFIs) in developing countries has increased dramatically in the last decade. This study sought to investigate the effects of competition on the loan performance of deposit taking microfinance institutions in Kenya. The study also sought to investigate the effects of multiple loan taking, cost efficiency, selection standards and customer relationship on the operational performance of deposit taking microfinance institutions in Kenya. The study found that there is a relationship between multiple loan-taking, selection standards and customer relationship cost efficiency and loan performance of the microfinance institutions. In addition, the study also established that multiple loan-taking negatively affects loan performance deposit-taking microfinance institutions. This study therefore recommends that MFIs should not offer multiple loans to customers so as to improve their loan performance.