An Empirical Survey on the Effect of Business Alignment on the Organizational Performance of Microfinance Banks in Kenya

Abstract: Microfinance banks play a key role in complementing banks in the provision of financial services, especially to the population that is poor and lacks access to commercial banks. The performance of Microfinance banks has been on the decline in Kenya due to slow processing time, lack of new products, low number of customers and lack of staff retention. Microfinance banks offer financial services to a population that cannot get the same services from commercial banks due to the high costs. Microfinance banks in Kenya have been performing poorly in the last few years occasioned by the closure of some of the branches of the microfinance banks while some like Century microfinance banks have been acquired by other Fintech companies. These microfinance banks need to leverage and reconfigure all the resources they have to achieve and maintain sustainable competitiveness. This study sought to investigate the effect of business alignment on the performance of Microfinance banks in Kenya. This study adopted the positivist research philosophy and also adopted the cross-sectional descriptive and explanatory research design. The study employed stratified proportionate sampling and simple random sampling from the 14 registered Microfinance banks regulated by the Central Bank of Kenya. Primary data was collected through structured questionnaires. Quantitative data was analyzed using descriptive statistics using means and standard deviations while inferential statistics were done through multiple linear regression and analysis of variance while observing the significance levels of p value<0.05. Diagnostic tests on multicollinearity, normality and heteroscedasticity were carried out. Tables and narratives were used to present the results. The study found that business alignment significantly positively affected the performance of microfinance banks. The findings of this study add to the knowledge by developing a conceptual framework based on the strategic alignment model and also revealing the specific alignments that are key to improving the performance of microfinance banks in Kenya. Management of microfinance banks should work with their regulators to change their business model of loan awarding, and leverage technology to offer appraisal and disbursement of quick loans on the mobile. Keywords: Microfinance banks, commercial banks, financial services. Title: An Empirical Survey on the Effect of Business Alignment on the Organizational Performance of Microfinance Banks in Kenya Author: Stephen Karanja, Eunice N. Wandiga, Julius Kahuthia International Journal of Recent Research in Commerce Economics and Management (IJRRCEM) ISSN 2349-7807 Vol. 10, Issue 3, July 2023 - September 2023 Page No: 178-186 Paper Publications Website: www.paperpublications.org Published Date: 16-September-2023 DOI: https://doi.org/10.5281/zenodo.8351246 Paper Download Link (Source) https://www.paperpublications.org/upload/book/An%20Empirical%20Survey%20on%20the%20Effect%20of%20Business-16092023-3.pdfInternational Journal of Recent Research in Commerce Economics and Management (IJRRCEM), ISSN 2349-7807, Paper Publications, Website: www.paperpublications.or

The Mediating Effect of Psychological Empowerment on the Relationship between Transformational Leadership and Staff Retention in Microfinance Institutions in Kenya

Retention of the desired staff in microfinance institutions has remained a major challenge as depicted from extant literature. It is often associated with inappropriate leadership deployed in these institutions among other antecedents. The current study, therefore, set out to establish the effect of transformational leadership on staff retention in microfinance institutions in Nairobi City County, Kenya, as well as the mediating effect psychological empowerment on the relationship between transformational leadership and staff retention in microfinance institutions in Nairobi City County, Kenya. The study was guided by Transformational Leadership Theory, Leader-Member Exchange Theory, Social Exchange Theory, and Resource-Based View Theory and founded on the positivism philosophy. Descriptive and explanatory research designs were adopted to guide the study. A sample of 298 respondents was obtained from 12 microfinance institutions in the Nairobi City County, Kenya, through census method for data collection. The unit of analysis was the head offices of the 12 microfinance institutions, while the unit of observation was the senior management level, middle management level and lower management level. Data was collected using structured questionnaires and analysed using descriptive and inferential statistics. The hypotheses were tested at the 5% significance level. The study established that transformational leadership was a significant predictor of staff retention, and that this relationship was partially mediated by the psychological empowerment. The study recommends that the microfinance institutions management should align transformational leadership practices with the strategic goals set for staff retention and emphasize on psychologically empowering strategies for their staff