EFFECT OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF DEPOSIT-TAKING MICROFINANCE BANKS IN NAIROBI CITY COUNTY, KENYA
Abstract
Study Problem: Microfinance institutions play a vital role in bolstering economies by facilitating increased financial flow. However, they also encounter challenges stemming from government policies, economic fluctuations, and loan defaults. This study investigates the impact of capital structure on the financial performance of deposit-taking microfinance banks in Nairobi County, Kenya.
Purpose of the Study: The purpose of this study is to determine the effect of capital structure on the financial performance of deposit-taking microfinance banks in Nairobi County, Kenya.
Methodology Used: The methodology used in this study is a descriptive research design. The entire population of the 13 licensed microfinance banks in Nairobi County was considered, and secondary data from various sources, including the Central Bank of Kenya and the Association of Deposit-Taking Microfinance Banks in Kenya, was analyzed using SPSS.
Findings of the Study: The findings of this study are that equity capital has a significant influence on the performance of deposit-taking microfinance banks.
Conclusion: The study concludes that robust capital structures and prudent equity management are crucial for the efficient operation of microfinance institutions.
Recommendation: The recommendations of this study are to prioritize capital adequacy planning, redirect efforts toward high-impact areas, and optimize debt management strategies to enhance overall performance.
Keywords: Capital Structure, Financial Performance, Deposit-Taking, Microfinance Banks, Nairobi City County, Kenya
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