Abstract: Microfinance enhances the financial capacity of the economically disadvantaged, often ignored by commercial banks and other lending institutions, by offering services such as credits, insurances, and savings, thereby encouraging self-employment. Due to various variables businesses encounter, guidelines, decrees, and rules are necessary to regulate their operations, ensuring a fair structure for all companies within a sector. This regulatory framework is essential for the financial industry, especially microfinance banks, to operate within set boundaries. This study examines the impact of prudential regulations on the financial performance of Kenyan microfinance banks. It specifically focuses on the effects of capital regulation on financial performance. Theoretical framework reviewed was stakeholder theory. The study's target population consisted of the fourteen (14) licensed microfinance banks in Kenya, employing a census of all these microfinance banks and an explanatory research design. The study utilized secondary data, which was sourced from the financial statements of selected microfinance banks in Kenya. This information encompassed data collected over a seven-year period, from 2015 to 2022. Findings revealed that capital regulation significantly (ρ = 0.013) and negatively (β = -3.3184) impacts financial performance. The study recommends that microfinance banks recognize the importance of capital management and ensure regulatory compliance.
Keywords: Capital Regulation, Microfinance Bank, Financial Performance.
Title: PRUDENTIAL REGULATIONS AND FINANCIAL PERFORMANCE OF LICENCED MICROFINANCE BANKS IN KENYA
Author: Wanjala Lucy Machuma, Dr. Charity Njoka
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 12, Issue 2, October 2024 - March 2025
Page No: 65-70
Research Publish Journals
Website: www.researchpublish.com
Published Date: 16-November-2024
