Influence of Business Characteristics on Microcredit Default in Kenya: a Comparative Analysis of Microfinance Institutions and Financial Intermediaries

Abstract

This study sought to investigate causes of loan default within MFIs and Financial Intermediaries (FIs) in Kenya. The specific objective addressed was to evaluate the influence of business characteristics on loan default in MFIs and FIs. A target population of 48 MFIs institutions and 76 Financial Institutions was used. A multistage sampling procedure and a sample of 48 MFIs and 48 FIs were selected. Random sampling was used to select the respondents since each participant had an equal opportunity to be selected. Primary data was collected by use of a questionnaire and analyzed by quantitative methods by use of SPSS; Version 21. Descriptive statistics and inferential statistics were employed to make generalizations. Data was presented in form of frequency tables, bar charts and pie charts for easy interpretation of results. A multiple regression model and Pearson correlation were used to establish relationships among the variables. The findings of the study indicated business characteristics were significant among MFIs and FIs but with some differences in the parameters measured .The findings are of significance to policy makers, MFIs, FIs, small businesses, universities and the general public as a source of knowledge for future reference. Key Terms: Loan Default, Microcredit, Portfolio at Risk (PAR), Microfinance Institutions (MFIs), Financial Intermediaries (FIs)