Effect of entrepreneurial orientation on the growth of micro finance institutions based in Nairobi, Kenya.

Abstract

Despite the impressive growth evident in the micro finance industry, its outreach still remains severely constrained. This study sought to examine the effect of entrepreneurial orientation (EO) dimensions on the growth of micro finance institutions as a strategy of capturing the large unexploited micro finance market. The specific objectives of the study were; to analyze the effect of risk taking propensity on the growth of micro finance institutions, to examine the effect of proactiveness on the growth of microfinance institutions, to examine the effect of autonomy on the growth of microfinance institutions, to examine the effect of innovativeness on the growth of microfinance institutions and to analyze the effect of competitive aggressiveness on the growth of microfinance institutions. The study examined a target population of 56 formal Microfinance institutions operating within Nairobi. It employed a census inquiry and collected data through questionnaires and face to face interviews. The target respondents were Chief Executive Officers, Owners, Branch managers, operational managers and Relationship managers. The study used mixed research design which involved the application of both qualitative and quantitative research techniques. Cronbach’s alpha was used as a measure of reliability and multiple regression analysis to test the hypotheses. The regression coefficient shows that the EO dimensions (independent variables) are positively and statistically significant in explaining the growth of MFIs. The regression coefficient shows that innovativeness is the most important variable. The study recommends the utilization of entrepreneurial orientation dimensions as a competitive strategy. It recommends the development of internal strategic measures that will promote innovation, proactiveness and autonomy in the management practices. The study recommends further research on effect of entrepreneurial orientation on Microfinance Institutions at different stages of growth. It also recommends a study on the impact of commercialization of microfinance institutions on alleviation of poverty.