EFFECT OF INNOVATION STRATEGIES ON GROWTH OF MICROFINANCE INSTITUTIONS IN NAROK TOWN, KENYA

Abstract

Innovations entailed various aspects adopted by firms to enhance long and short-term decisions making towards remaining competitive in the business environment. Microfinance institutions have adopted innovation strategies such as; institutional innovation, product innovation, process innovation, and market innovations that are the drivers of their growth. MFIs in Kenya and more so in Narok Town are no exception. This study sought to assess the effect of innovation strategies on the growth of microfinance institutions in Narok Town, Kenya. The study specifically examined the effect of institutional innovations, product innovations, process innovations, and market innovation on the growth of microfinance institutions firms in Nark Town, Kenya. The study was guided by the four theories: Induced Institutional Innovation, Technology Acceptance Model, Diffusion of Innovation and Economic Value-Added. The study adopted a cross-sectional research design. The study used census to pick the 180 respondents in the 11 registered MFIs. Data was collected using questionnaires from primary and secondary. Multiple linear regression model was used to assess the effect of institutional innovation, product innovation, process innovation and market innovation on growth of MFIs, a Pearson Correlation was run, and further the four independent variables were regressed on growth. The results showed that the three independent variables; institutional innovation, product innovation and process innovations had a significant and positive effect on growth of MFIs and market innovation was insignificant. It was concluded that the three innovation strategies impact MFIs growth positively. Therefore, it is recommended that to sustain MFIs growth, there is need to invest more on institutional innovation, product innovation and process innovation which will translate to more customers, higher sales and potentially higher profits.