An assessment of factors affecting the financial performance of microfinance institutions in Zimbabwe

Abstract

This research study investigates the factors affecting the financial performance of MFIs in Zimbabwe. The research study is important to Zimbabwe because of the crucial role MFIsare expected to play in the economy which has become to be dominated by the informal sector. The informal sector has become a source of employment and livelihood for the large proportion of the population who are faced with high levels of formal unemployment and poverty. The analytical framework developed and used in this study was examined using data collected from the successful administration of 92 questionnaires and 2 interview sessions. In terms of data analysis, the research study utilized techniques which included descriptive statistics and inferential statistics. In inferential statistics, the research study employed regression analysis and correlation analysis. The research study found different levels of influences on financial performance and these included MFI specific factors, macroeconomic country specific factors, and external governance and regulatory factors. The study found out that in the model, the MFI specific factors were significant predictors of financial performance of MFIs. However macroeconomic country specific factors, and external governance and regulatory factors were found to be insignificant in predicting the financial performance of MFIs in Zimbabwe. These conclusions were derived from the regression analysis of data inputted into the model. The research study found out that the model was not significant and not entirely depictive of the situation in the micro-finance industry of Zimbabwe. The research study thus concluded that there may be other major factors not captured in the model that have a significant effect on the financial performance of MFIs in the country. Despite the model not being significant in its entirety, the study concluded that MFI specific factors were the most critical factors influencing the financial performance of MFIs in Zimbabwe. On the basis of the conclusions, it is recommended that the development and growth of MFIs in Zimbabwe should be focused on building their institutional capacities.