Effect of investment risk management practices on financial performance of microfinance institutions in Kenya: a case of Kenya women finance trust in Kisii town

  • Askah Nyakerario Barongo
  • Willy Muturi

Abstract

Investment risk management is a fact used to consider investment decision of company. The aim of the study was to assess the effects of investment risk management practices on financial performance in Kenya women finance trust in Kisii town.  In particular the researcher focused on the following specific objectives to evaluate the effects of risk diversification on financial performance of microfinance institutions, and to find out the effect of Investment risk Analysis on financial performance of microfinance institutions. The study adopted descriptive research design because it explained how, why and when and what according to the situation. The target population was financial statements from 2011-2015.Data was collected, edited and coded in excel for analysis. Data was presented by use of tables and figures. The researcher found out that the higher the risk diversification measures the higher the profitability of the organization, risk analysis is positively correlated to financial performance of micro finance institutions, risk monitoring has a significance effect on the profitability of an organization and risk control has a significant effect on financial performance of microfinance institutions. The researcher concluded that in microfinance institutions risk diversification is a vital consideration if profits have to be generated, risk analysis is viewed as a mechanism of appraising the costs and the benefits associated with each investment activity undertaken, risk monitoring is a post investment process that keeps a check on the proceedings and risk control is an imperative process that should be exercised by all institutions in order to manage the occurrence of risks which would translate to losses either of profits or value of the existing asset base. The researcher recommended that microfinance institutions should at all times utilize various optimal risk diversification measures to minimize risks and maximize return, risk analysis is a procedure that should be emulated and adopted by all rational investors, risk monitoring should be constantly adopted to determine the trends for earlier initiation of any corrective measures in case of negative extremes and management of microfinance institutions should enforce diverse risk control measures geared towards mitigating the likely losses to the institutions.

Key Words: Investment risk management; Financial performance; Microfinance institutions; Kenya

Published
2018-10-11