Effect of Products and Services Alliances on the Performance of Microfinance Institutions in Rwanda

Abstract

In today's world of cutthroat competition, considerable attention has been devoted to the formation of strategic alliances. Different organizations form alliance with other partners with different motivation. Some of the cited motivations for alliances include pooling resources, increasing capabilities; improve product development and service delivery, among others. Due to these varying alliances, there are various forms of alliances that organizations can engage in. However, research has shown that not all alliances end up with gaining the intended benefits. This research investigated the effect of product and service alliance on firm performance in microfinance institutions. Primary data was obtained using structured questionnaire distributed to a sample of 220 managers/CEO selected from a total of 419 MFIs. Data was analyzed using STATA 16.1 and Structural Equation Modeling (SEM) used to test the research hypothesis. The results showed that the model was significant at 10% ( , p<0.1). It also revealed that product and service alliance is positively and significantly related to firm performance with a coefficient of 0.072 (p<0.05). This being the first study of the kind, here in Rwanda, among the MFIs, it is recommended that MFIs should embrace alliance as way of improving their resource base and their product innovation and service delivery as well as their financial performance.