Factors affecting institutional transformation for regulated MFIs

Simple item page
dc.creatorMboya, Josphat Kiweu
dc.creatorNdulu, John Kimuli
dc.date07/03/2013
dc.dateWed, 3 Jul 2013
dc.dateWed, 3 Jul 2013 20:06:42
dc.dateWed, 3 Jul 2013 20:06:42
dc.date.accessioned2015-03-18T11:29:02Z
dc.date.available2015-03-18T11:29:02Z
dc.descriptionArticle
dc.descriptionPurpose - Regulating microfinance activities has been an important policy concern in improving financial inclusion and extending financial services to all. However, introducing a regulatory framework of any kind pushes targeted institutions to change. In this case, microfinance regulatory framework in Kenya that came to effect in 2008 has created three tiers of microfinance institutions: prudentially regulated deposit-taking institutions, credit only and unregulated informal groups. Those undertaking deposit-taking business were required by this regulation to transform their operations to comply with the requirements. Though many institutions wanted to be allowed to mobilise public deposits, only six institutions had managed to obtain a license in four years after the regulation became operational. The purpose of this research was to establish the factors affecting this microfinance transformation process. Design/methodology/approach – The research was carried out by collecting empirical evidence from microfinance institutions target by regulation in Kenya to establish these factors contributing to the slow phase of transformation. The possibility that the challenges could be affecting both the regulator and institutions being regulated was explored. Findings – This study identifies several important factors affecting the transformation process of microfinance institutions in Kenya. These include the ability to meet capital requirements, restructuring existing ownership and getting new shareholders, ability to raise funds for transformation, acquiring suitable information systems, motivation to be regulated, governance issues and managerial inertia. These factors explain why certain institutions have moved faster than others in the transformation process and why some have opted to remain credit only. Research limitations – The availability of reliable database of microfinance institutions that were a target for this study was a challenge affecting sampling and reach. In addition, data collected was limited to one point of contact yet some factors could relate to operational process. Originality/value – The study broadens research to transformation process of regulated microfinance institutions, factors affecting them and regulatory framework.
dc.description.abstractPurpose - Regulating microfinance activities has been an important policy concern in improving financial inclusion and extending financial services to all. However, introducing a regulatory framework of any kind pushes targeted institutions to change. In this case, microfinance regulatory framework in Kenya that came to effect in 2008 has created three tiers of microfinance institutions: prudentially regulated deposit-taking institutions, credit only and unregulated informal groups. Those undertaking deposit-taking business were required by this regulation to transform their operations to comply with the requirements. Though many institutions wanted to be allowed to mobilise public deposits, only six institutions had managed to obtain a license in four years after the regulation became operational. The purpose of this research was to establish the factors affecting this microfinance transformation process. Design/methodology/approach – The research was carried out by collecting empirical evidence from microfinance institutions target by regulation in Kenya to establish these factors contributing to the slow phase of transformation. The possibility that the challenges could be affecting both the regulator and institutions being regulated was explored. Findings – This study identifies several important factors affecting the transformation process of microfinance institutions in Kenya. These include the ability to meet capital requirements, restructuring existing ownership and getting new shareholders, ability to raise funds for transformation, acquiring suitable information systems, motivation to be regulated, governance issues and managerial inertia. These factors explain why certain institutions have moved faster than others in the transformation process and why some have opted to remain credit only. Research limitations – The availability of reliable database of microfinance institutions that were a target for this study was a challenge affecting sampling and reach. In addition, data collected was limited to one point of contact yet some factors could relate to operational process. Originality/value – The study broadens research to transformation process of regulated microfinance institutions, factors affecting them and regulatory framework.
dc.identifier.urihttp://hdl.handle.net/11071/3629
dc.languageeng
dc.rightsBy agreeing with and accepting this license, I (the author(s), copyright owner or nominated agent) agree to the conditions, as stated below, for deposit of the item (referred to as .the Work.) in the digital repository maintained by Strathmore University, or any other repository authorized for use by Strathmore University. Non-exclusive Rights Rights granted to the digital repository through this agreement are entirely non-exclusive. I understand that depositing the Work in the repository does not affect my rights to publish the Work elsewhere, either in present or future versions. I agree that Strathmore University may electronically store, copy or translate the Work to any approved medium or format for the purpose of future preservation and accessibility. Strathmore University is not under any obligation to reproduce or display the Work in the same formats or resolutions in which it was originally deposited. SU Digital Repository I understand that work deposited in the digital repository will be accessible to a wide variety of people and institutions, including automated agents and search engines via the World Wide Web. I understand that once the Work is deposited, metadata may be incorporated into public access catalogues. I agree as follows: 1.That I am the author or have the authority of the author/s to make this agreement and do hereby give Strathmore University the right to make the Work available in the way described above. 2.That I have exercised reasonable care to ensure that the Work is original, and to the best of my knowledge, does not breach any laws including those relating to defamation, libel and copyright. 3.That I have, in instances where the intellectual property of other authors or copyright holders is included in the Work, gained explicit permission for the inclusion of that material in the Work, and in the electronic form of the Work as accessed through the open access digital repository, or that I have identified that material for which adequate permission has not been obtained and which will be inaccessible via the digital repository. 4.That Strathmore University does not hold any obligation to take legal action on behalf of the Depositor, or other rights holders, in the event of a breach of intellectual property rights, or any other right, in the material deposited. 5.That if, as a result of my having knowingly or recklessly given a false statement at points 1, 2 or 3 above, the University suffers loss, I will make good that loss and indemnify Strathmore University for all action, suits, proceedings, claims, demands and costs occasioned by the University in consequence of my false statement.
dc.subjectMicrofinance
dc.subjectMicrofinance Regulation
dc.subjectTransformation challenges
dc.subjectKenya
dc.subjectDeposit taking
dc.titleFactors affecting institutional transformation for regulated MFIs
dc.typeArticle
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
Factors affecting institutional transformation for regulated MFIs.pdf
Size:
164.29 KB
Format:
Adobe Portable Document Format
Description:
Article
Download
Collections
SMC Scholarly Articles