| dc.description.abstract | Micro Finance Institutions in Kenya have had increasing recognition since the 1990’s for the
role they play in providing financial services within the communities, through their
participation on poverty mitigation. However, the inconsistency of large number of MFIs in
providing financial help to alleviate the high poverty levels has been a major concern. The
increase in number of poor people within the society, has contributed negatively to the main
idea of MFIs in eradicating poverty. In addition, MFIs should ensure that they have the
financial capacity to offer their services to the poor people, families and communities.
Therefore, this study purposes to examine the financial determinants of MFIs outreach in
Kenya. The objectives of the research are to evaluate the effects of microfinance institution
size, liquidity, capital adequacy and operating efficiency on the outreach performance of
MFIs in Kenya. The research was directed by transaction cost theory, passive theory, capital
adequacy theory and liquidity preference theory. This study implemented a descriptive
research design. The target population for this study was 12 Micro Finance Institutions listed
with the Association of Micro Finance Institutions (AMFI), and are licensed by CBK and
running in Kenya as Deposit Takings Microfinance institutions. The panel data collected was
analysed through descriptive and inferable statistics such as multiple regression to determine
the influence of dependent variable and independent variables. The panel data analysis was
done using STATA software. Diagnostic tests were done and the results were as follows:
The research established that the operating efficiency affected outreach negatively and had no
significant influence on the MFIs’ outreach in Kenya. The study also found that capital
adequacy influence was positive however, had no significant outcome on the MFIs’ outreach
in Kenya. The research also showed that MFIs size had a significant effect on MFIs’ outreach
in Kenya. MFIs size affected outreach positively. Finally, findings discovered that the effect
of liquidity was negative and was significant on MFIs’ outreach in Kenya. The study
recommended that smaller MFIs should consider merging to bigger MFIs. This is to help the
institutions earn from the economies of scale. The microfinance institutions should keep low
their debts and maximize their equity. The MFIs should ensure that the equity is maximized
to enhance financial capacity to enhance the reaching of the poor efficiently. Lastly, MFIs
should consider matching between reducing the transaction costs involved with the outreach
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