Influence of Credit Rationing on Financial Performance of Deposit Taking Microfinance Institutions in Uasin Gishu County, Kenya

Abstract

Globally credit usually represents the bulk of the microfinance institution's assets, while interest on the credit represents the major source of income. In this regard, the current study had been designed to investigate the Influence of credit rationing on financial performance of deposit taking microfinance institutions in Uasin Gishu County, Kenya. The study sought to; establish the Influence of interest rate on financial performance of deposit taking microfinance institutions in Uasin Gishu County, Kenya. The study adopted a survey design based on samples drawn from across the deposit taking microfinance institutions in Uasin Gishu County, Kenya. The target population was 68 credit officers from 13 registered deposit taking microfinance institutions sampled by census. Study relied on secondary data for the financial performance and interest rate and primary data on loan repayment period and collateral security. Primary data was collected by use of questionnaires. The validity and reliability of the instruments were tested improve credibility of data. Collected data was analyzed by use of both inferential and descriptive statistics using SPSS version 20. The study established linear by linear association for interest rate, loan repayment period and collateral with financial performance to be 0.010, 0.036, 0.002 P<0.05 respectively. Therefore, there was a significant positive association between interest rate, collateral and loan repayment period on financial performances of deposit taking microfinance institutions.