Effect of Managerial Capability on Growth of Micro-Finance Finance Banks in Kenya

Microfinance banks play a significant role in the Kenyan economy, contributing to increased financial inclusion, particularly among low-income populations and underserved small businesses. However, despite their importance, microfinance banks in Kenya continue to face persistent growth challenges. According to the Central Bank of Kenya, the number of licensed microfinance banks declined from 13 in 2018 to 9 in 2022, with several banks either merging, converting into credit-only institutions, or being liquidated due to operational inefficiencies and capital constraints. In response to these challenges, the study sought to assess the effect of managerial capability on the growth of microfinance banks in Kenya. The study was anchored on institutional theory and adopted a positivist research philosophy, employing both descriptive and explanatory research designs. The target population comprised 14 licensed Microfinance banks in Kenya. Given the relatively small and manageable size of the target population, the study employed a census technique, allowing data to be collected from the entire population of 183 respondents without the need for sampling. Data was collected using semi-structured questionnaires, which were distributed through the drop-and-pick-later method. The analysis involved the use of both descriptive and inferential statistics to summarize, interpret, and draw conclusions from the data with multiple linear regression models employed to assess relationships among variables. Diagnostic tests included linearity, normality, homoscedascity and multicollinearity. Based on the findings, the study concluded that managerial capability has a statistically significant effect on the growth of Microfinance Banks in Kenya. In light of the findings, the study recommends that microfinance banks in Kenya prioritize the development and enhancement of managerial capability as a strategic lever for growth. Specifically, Microfinance Banks should invest in continuous professional development programs for both executiveleadership and board members.