Non-performing Loans as a Determinant of Financial Performance of Deposit Taking Microfinance Institutions in Nairobi City County, Kenya

Abstract

Financial performance of any financial institution is an important measure of its stability and sustainability. This study assesses the effect of non-performing loans on financial performance. The study used theoretical underpinnings to identify the factor and used survey research to determine its effect on Deposit Taking Microfinance Institution (DTMIs) that were registered by the year 2012. Purposive sampling was used to identify the sample from the list the DTMIs registered by Central Bank of Kenya. The study applies both qualitative and quantitative methods of data analysis. A pilot study was first conducted to test the reliability of the research tool, corrections made and then used for the research. The questionnaire was used to collect data from a purposive sample of 60respondents out of which 52 gave responses. Statistical Packages for Social Sciences (SPSS), R-Statistical software and Ms Excelwere used for data analysis and results presented using tables and figures. The results were consisted with the alternative hypothesis of the study.