Effect of Capital Structure on Financial Sustainability of Deposit-Taking Microflnance Institutions in Kenya

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dc.contributor.author Wambua, Mary Mwongeli
dc.contributor.author Ariemba, Jared M.
dc.date.accessioned 2018-04-16T08:34:09Z
dc.date.available 2018-04-16T08:34:09Z
dc.date.issued 2018
dc.identifier.citation Business, Management and Economics Research, vol. 4 (1), pages 1-10, 01-2018. en_US
dc.identifier.issn 2412-1770
dc.identifier.issn 2413-855X (p)
dc.identifier.uri https://ideas.repec.org/a/arp/bmerar/2018p1-10.html
dc.identifier.uri http://repository.seku.ac.ke/handle/123456789/4129
dc.description.abstract The purpose of this research was to empirically investigate the effect of capital structure on financial sustainability of deposit-taking micro finance institutions (DTMs) in Kenya. The specific objectives were to determine the impact of debt on the financial sustainability of DTMs in Kenya, to assess the influence of retained earnings on the financial sustainability of DTMs in Kenya, to examine the effect of ordinary share capital on the financial sustainability of MFIs in Kenya, and to investigate the impact of preferred share capital on the financial sustainability of DTMs in Kenya. The target population of the study was all the 13 DTMs in Kenya registered with the Central Bank of Kenya. Secondary data was collected on all the DTMs financial data from the Central Bank of Kenya reports. Data was analyzed using multiple regression model using SPSS and R as the data analysis tool. Based on the findings 76.9% of the DTMs did not earn enough revenue to cover the actual financing direct costs, which include the total operating costs, loan loss provisions and the financing costs but excluding the cost of capital. The analysis of variance (ANOVA) table indicated that the predictor variables influenced the predictor variable significantly at 5% significance level. Among the four variables; debt and retained earnings were statistically significant variable at 5% significance level with 1.265 and 1.630 coefficient respectfully. Whereby the financial sustainability change by 1.265 and 1.630 for every unit change of debt or retained earnings respectfully. Therefore, for the deposit-taking microfinance institutions to remain afloat in the lending business, they should utilize any borrowing opportunity, plough back profits to the business, and low proportion of preferred share capital. Deposit-taking microfinance institutions should avoid usage ordinary share capital as it negatively affected financial sustainability. en_US
dc.language.iso en en_US
dc.publisher Academic Research Publishing Group en_US
dc.subject Financial sustainability. en_US
dc.subject Operational self sufficiency en_US
dc.subject Deposit taking microfinance institution and capital structure en_US
dc.title Effect of Capital Structure on Financial Sustainability of Deposit-Taking Microflnance Institutions in Kenya en_US
dc.type Article en_US


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