ISSN: 2225-8329
Open access
The background circumstances presently confronting Micro Financial Institutions are diverse from those of previous periods. They have experienced incredible high-tech fluctuations, economic uncertainty, stiff rivalry, swift societal variations and administrative rules. These variations in the commercial setting decide the accomplishment and effectiveness of Micro Financial Institutions. Statistics reveal that the stiff competition in Kenyan financial industry has seen the involvement of the industry to the gross domestic product in terms of their assets reduce and that the highly volatile financial environment has led to an upsurge in non-repayment of debts in the financial sector. With the control of the interest rates, the focus of the borrowers has shifted from the Micro Financial Institutions, which charge high interest rates to commercial banks, which charge below fourteen percent. As a result, the Micro Financial Institutions are facing a challenge and to survive, there is a need to adopt competitive tactics. This study wanted to evaluate the effect of competitive strategies on performance of Micro Financial Institutions. Precisely, the study pursued to establish the effect of cost leadership strategy on performance of Micro-Finance Institutions in Kenya following Interest Rate Cap, to determine the effect of differentiation strategy on performance of Micro-Finance Institutions in Kenya following Interest Rate Cap, to examine the effect of focus strategy on performance of Micro-Finance Institutions in Kenya following Interest Rate Cap and to establish the effect of innovation strategy on performance of Micro-Finance Institutions in Kenya following Interest Rate Cap. This study used the Porter’s Competitive Advantage Theory, the Resource Based Theory of competitive advantage and Roger’s diffusion theory of innovation to explain the relationship between the study variable. The study collected primary data using questionnaires. A descriptive survey design was adopted. The Target population comprised of all the 13 licensed MFIS by the Central Bank of Kenya as at the year 2019. A census was conducted on all the 13 MFIs. The unit of observation was heads of corporate banking, Information Technology, Retail banking, Marketing and strategic unit of each MFI. The total target was therefore 65 respondents. Information assembled was scrutinized by aid of descriptive and inferential statistics ranging from frequencies, percentages, correlation and regression. Statistical Package for Social Sciences version 22 was used for Data Analysis. The study found out the Cost leadership strategy, Differentiation strategy, Focus strategy and Innovation Strategy significantly and positively affected the performance of Microfinance institutions in Kenya. The study recommends that cost leadership strategy is an important strategy embraced by MFIs to enable them survive competition in the market. Secondly, MFIs need to understand how to differentiate their products in the market. Third, MFIs need to focus in a given market and provide excellent products to be able to grow. Lastly, MFIs need to embrace innovation as a strategy to drive their competitiveness in the financial markets. It is suggested that another study be done using SACCOs in order to develop a broader perspective of Performance using the same objectives. In addition, another study can be undertaken on commercial banks in Kenya to find out the effect of competitive strategies on their performance.
Abdolshah, M., Moghimi, M., & Khatibi, S. A. (2018). Investigating competitive advantage in banking industry based on Porter's Generic strategies: IRANs newly-established private banks. International Journal of Applied Management Sciences and Engineering (IJAMSE), 5(1),52-62.
Aguoru, C. N., Umogbai, M. E., & Ozowa, V. (2018). Effect of strategic analysis and strategy implementation on service quality of a popular telecommunication company in Nigeria. International Journal of Scientific Research and Management (IJSRM), 6(4 ), 305-311.
Ansoff, H., Kipley, D., Lewis, A., Stevens, R. H., & Ansoff, R. (2018). Implantation strategic management. Palgrave Macmillan.
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage, . Journal of Management, , 17,(1)99-120.
Brooks, C. (2008). Introductory Econometrics for Finance, 2nd Edition. Cambridge, United Kingdom: Cambridge University.
CBK. (2019, 12 31). Central Bank of Kenya. Retrieved from Central Bank of Kenya Website: https://www.centralbank.go.ke/uploads/banking_sector_reports/1308445982_Credit%20Survey%20Report%20for%20the%20Quarter%20ended%20December%202018.pdf
Dombrowski, U., Krenkel, P., & Wullbrandt, J. (2018). Strategic positioning of production within the generic competitive strategies. Procedia CIRP, 72,1196-1201.
Gatutha, P. G., & Namusonge, M. (2020). Competitive strategies and the performance of supermarkets in Nairobi city,Kenya. International Academic Journal of Human Resource and Business Administration, 3(9),291-303.
Karyani, E., & Rossieta, H. (2018). Generic strategies and financial performance persistence in the banking sector in Indonesia. Management & Accounting Review, 17(1),15-30.
MoCDM. (2018). Ministry of Cooperative Development and Marketing:SACCOS Annual Performance Report, Murang’a County. Nairobi: Ministry of Cooperative Development and Marketing.
Nyachwaya, J. M., & Rugami, J. M. (2020). Competitive strategies and performance of commercial banks in Mombasa county,Kenya. International Journal of Business Management, Entrepreneurship and Innovation, 2(1),65-74.
Odero, C. O., & Rotich, G. (2016). Factors influencing strategy implementation on the performance of commercial banks in Kenya, A case of co-operative bank Bank of Kenya. Strategic journal of Business and change Management, 3(4),73 - 87.
Peteraf, M. (1993). The Cornerstones of Competitive Advantage: A Resource-Based View. Strategic Management Journal, , 4,(3),179-191.
Porter, M. E. (2008). On competition. Harvard Business Press.
Powell, B. J., Waltz, T. J., Chinman, M. J., Damschroder, L. J., Smith, J. L., Matthieu, M. M., . . . Kirchner, J. E. (2015). A refined compilation of implementation strategies:results from the expert recommendations for implementing change (ERIC) project. Implementation Science, 2-14.
Rumelt, R. (1984). Towards a strategic theory of the firm ;Competitive Strategic Management,. Englewood Cliffs (NJ). : Prentice-Hall, .
Santos, J. B., & Brito, L. L. (2017). Toward a subjective measurement model for firm performance. Brazilian Administration Review, 9(SPE), 95-117.
Sekaran, U., & Bougie, R. (2010). Research Methods for Business: A Skill Building Approach, 5th ed. . West Sussex: John Wiley and Sons Ltd.
Wahyuni, D. (2015). The research design maze: Understanding paradigms, cases, methods and methodologies. Journal of Applied Management Accounting Research, 10(1) 69-80.
Wicker, P., Soebbing, B. P., Feiler, S., & Breuer, C. (2015). The effect of Porter’s generic strategies on organisational problems of non-profit sports clubs. European Journal for Sport and Society, , 12(3), 281-307.
Yin, R. K. (2017). Case study research and applications: Design and methods. . Sage publications.
Yoder, B. K. (2019). Retrenchment as a screening mechanism: Power shifts, strategic withdrawal, and credible signals. American Journal of Political Science, 63(1),130-145.
Zikmund, W. G., Quinlan, C., Griffin, M., Babin, B., & Carr, J. (2019). Business Research methods. Cengage Learning EMEA.
In-Text Citation: (Wanjiku & Deya, 2021)
To Cite this Article: Wanjiku, M. L., & Deya, J. (2021). Effect of Competitive Strategies on Performance of Micro-Finance Institutions in Kenya. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(1), 407-422.
Copyright: © 2021 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode