Effect of Equity Financing on Financial Performance of Deposit Taking Microfinance Institutions in Kenya

Abstract

A firm’s financing structure has great significance in financing and investment choice, because of its effect on profitability, with risk levels the firm encounters because of its dependence and leverage intensifying. Nowadays, more and more entities from the developed world employ different sources such as equity financing to finance its operations when they need to expand their firm size or reinvest to gain more profits. Despite the availability of equity and other financing sources, the performance of DTMIs in Kenya has continued to deteriorate. This study thus sought to establish the influence of equity financing on financial performance of DTMIs in Kenya. This study employed a descriptive research design. The study carried out a census of the 13 DTMIs in Kenya as at 31st December 2018. The study embraced secondary data that was  collected using a data collection sheet for a period of five years (2014-2018). For the purpose of data analysis, the study employed both descriptive and inferential statistics analysis methods using SPSS version 23. Under descriptive statistics, central tendency measures were employed. These included: mean, maximum, minimum and standard deviation among others. Inferential statistical analysis was used in predicting the relationship existing between equity financing and financial performance. The findings of the study indicate that equity financing has a positive significant influence on financial performance of DTMIs in Kenya. The study therefore recommends management of the DTMIs to increase their equity financing by selling their shares to potential shareholders and investors.

Key words: Equity, Financial performance, financing structure

DOI: 10.7176/RJFA/11-17-09

Publication date:September 30^th 2020