STRATEGIC MANAGEMENT PRACTICES AND SOCIAL SUSTAINABILITY OF MICROFINANCE INSTITUTIONS IN KITUI COUNTY, KENYA

Abstract

Social sustainability remains a significant challenge among microfinance institutions (MFIs) in Kenya, particularly in ensuring long-term social impacts that benefit low-income populations. Notably, these institutions struggle with integrating social goals, such as poverty alleviation and financial inclusion, alongside their financial objectives. For instance, despite a substantial growth in the sector, only 39% of the rural population in Kenya including Kitui County is served by MFIs, indicating a gap in reaching marginalized communities. This limited outreach, coupled with high-interest rates averaging 30%, raises concerns about the institutions' ability to contribute to the social well-being of vulnerable groups, thus hampering social sustainability. Therefore, this study’s general objective was to examine how strategic management practices influenced the social sustainability of microfinance institutions in Kitui County, Kenya. The study also investigated how Kitui County, Kenya's microfinance institutions' social sustainability was affected by strategic planning, strategy execution, and strategy evaluation. The study also looked at the ways in which organizational traits in Kitui County, Kenya, affected the relationship between social sustainability and strategic management techniques in microfinance organizations. The study was anchored on the Triple Bottom Line Theory, Delta Model, and the Resource-Based View Theory. A descriptive survey research design was used for this investigation. The target population were 5 Microfinance Institutions (MFIs) in Kitui county and 150 leaders. A census method was used to select all the leaders and MFIs to form the sample size. Questionnaires were used in the collection of primary data. Quantitative analysis was applied to the acquired data. The study used version 24 of the Statistical Package for Social Services to condense the quantitative data into frequencies and percentages. The data was described using percentages, means, and standard deviations, and displayed using tables, pie charts, and figures. To make inferences about the data, multiple regression analysis and correlation were employed. Inferential statistics were used to determine the relationship between the dependent variable (social sustainability of MFIs) and the independent variable (strategic management practices). From the findings, it was established that strategic management practices addressed 39.2% of the social sustainability of MFIs in Kitui County. Moreover, strategic planning (b=.617, p value=0.000<0.05), strategy implementation (b=.819, p value=.000<0.05) and strategy evaluation (b=.254, p value=0.013<0.05) had a positive and significant influence on the social sustainability of MFIs in Kitui County, Kenya. It was concluded that the indicators of strategic management practices had a statistically significant influence on the social sustainability of MFIs in Kitui County, Kenya. Numerous parties, including the government and financial regulatory agencies, donors and investors, MFI clients and beneficiaries, and academics, will find this study to be significant. This study recommends that the management of the MFIs in Kitui County should dedicate more time and resources in strategic planning and implementation. The management of the MFIs should ensure that their employees are conversant with the overall strategic vision/Mission, goals and Objectives of the MFI’s.