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Attracting Microfinance Investment Funds: Promoting Microfinance Growth through Increased Investments in Kenya

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  • Matu, Jeffrey Ben

Abstract

Although microfinance has played a significant role in providing a wide range of financial products and services, many microfinance institutions (MFIs) in Kenya still face major challenges with efficiently and effectively delivering microfinance services in the country. As the demand for these services continues to grow, the limited sources of available capital have greatly undermined the capabilities of MFIs to efficiently operate their services and expand their various microfinance activities. This has led to a financial gap in the supply of microfinance services, and consequently has reduced the opportunities for the poor to access basic socio-economic benefits that could potentially improve their wellbeing. The widening financial gap in the microfinance sector has been attributed to self-governance issues, capacity building issues, non-compliance with reporting requirements, and a lack of appropriate performance criteria. These and other factors have jeopardized MFIs sustainability and have compromised the delivery of microfinance services in the country. There is a need for a policy that advocates for better access to capital sources and investment opportunities for microfinance sustainability, and also encourages MFIs to increase their accessibility, build capacity, be more transparent, adopt acceptable performance standards, and promote professionalism to enhance service delivery. This paper analyzes three policy alternatives which include: (i) maintaining the status quo; (ii) government regulation of all MFIs; and (iii) voluntarily self-regulating by member MFIs as alternatives for closing the financial gap in the supply of microfinance services. All the three alternatives are evaluated against the following criteria: efficiency, financial and political feasibility, and accessibility to determine the best policy option.

Suggested Citation

  • Matu, Jeffrey Ben, 2008. "Attracting Microfinance Investment Funds: Promoting Microfinance Growth through Increased Investments in Kenya," MPRA Paper 12084, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:12084
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    File URL: https://mpra.ub.uni-muenchen.de/12084/1/MPRA_paper_12084.pdf
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    References listed on IDEAS

    as
    1. Robert Pollin & Mwangi wa Githinji, 2008. "An Employment-Targeted Economic Program for Kenya," Books, Edward Elgar Publishing, number 13219.
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    More about this item

    Keywords

    microfinance; investment funds; social responsible investing; Africa; Kenya; public policy; economics; finances; financial economics; public economics; Kenya microfinance Act;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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