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Fin 5013 Microfinance Theories And Practice Town Campus Question Paper
Fin 5013 Microfinance Theories And Practice Town Campus
Course:Master Of Business Administration In Corporate Management
Institution: Kca University question papers
Exam Year:2014
UNIVERSITY EXAMINATIONS: 2013/2014
EXAMINATION FOR THE MASTERS OF BUSINESS ADMINISTRATION
(MBA) IN CORPORATE MANAGEMENT
FIN 5013 MICROFINANCE THEORIES AND PRACTICE TOWN CAMPUS
DATE: AUGUST, 2014
TIME: 3 HOURS
INSTRUCTIONS: Answer Question One and Any Other Three Questions
QUESTION ONE (31 MARKS)
Read the case below and answer questions that follow
Kenya Women Finance Trust- a model lender
As its name suggests, the Kenya Women Finance Trust is a microfinance institution established by
Kenyan women and offering services only to low-income Kenyan women. IFAD, in partnership with
the Belgian Survival Fund, has been a major donor since 1992.
The early years of the KWFT were rocky. The group of Kenyan professional women who founded the
trust in 1981 soon ran into problems. Management was weak and there were reports of widespread
insider lending among the Board of Directors. By 1989, most of KWFT’s loans were non-performing
and new lending had ground to a halt.
In 1991, the trust’s original donors – UNDP and the Ford Foundation – stepped in to help rehabilitate
the trust. Thanks to their help, and that of other donors, including IFAD and the Belgian Survival
Fund, KWFT was able to resume business in 1992 using sound financial practices .
By the end of the 1990s, the trust was the largest microfinance institution in Kenya. Its financing
operations were running smoothly. Yet management knew that it could not continue indefinitely;
operations were too dependent on grants from donors. In 2000, despite steady growth and a good loan
recovery rate, KWFT was still posting annual losses and was far from being financially self-sufficient.
Clearly, if KWFT was going to stay in business, something would have to be done.
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Management had to decide between two basic development options. The first, and safest, was to
consolidate operations in existing areas, slowly increasing the amount and number of average loans
and focusing increasingly on easy-to-reach clients in urban areas. This was an almost guaranteed way
of providing slow, sustainable growth.
The second, riskier, option was to aim for a bigger impact by expanding aggressively into rural areas,
including the poorest parts of the country, to become a truly national institution. KWFT chose the
second option. It paid off. By 2006, its financial self-sufficiency ratio had increased to 105 per cent;
KWFT’s own income was more than enough to cover all its operating and financial expenses. This
level of financial independence is rare for any microfinance institution, let alone one operating in rural
areas of Sub-Saharan Africa.
The trust now has 46 rural branches in eight regions of Kenya, compared with 24 branches in four
regions in 1998. More than 100,000 low-income Kenyan women are running small businesses with
loans from KWFT, compared with just under 29,000 in 2000. The women report that their lives have
improved as a result of their relationship with KWFT. It is not just the women who benefit, but their
husbands, children and extended families.
The number of loans managed by each credit officer has grown to 404 from 287. Member savings have
soared to US$16.8 million from US$2.2 million. IN 2006, KWFT disbursed US$52 million in loans to
its clients. Clearly, in the past six years the trust has surpassed all of its development objectives by a
significant margin.
Equally importantly, KWFT is still reaching its original target group of poor women. While some
women have advanced through many loan cycles, creating bigger businesses and taking out larger
loans, most of the trust’s borrowers are poor women. First loans for newcomers still start at US$100 to
US$200. The fact that most of the trust’s clients continue to borrow, loan cycle after loan cycle, shows
that they consider KWFT’s services beneficial for themselves and their households.
Required:
a)
Clearly explain some of the sound financial practices that an MFI could use to ensure growth
and success. (7 Marks)
b) How does insider lending affect loan performance? (7 Marks)
c) Describe the challenges that you think this MFI faced in its early years of operations.
(7 Marks)
d)
The fact that the volume of operations of KWFT in Kenya and the number of branches
nationwide has increased tremendously does not translate to women empowerment. Discuss
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(10 Marks)
QUESTION TWO (23 MARKS)
a) Draw a distension between microfinance and microcredit
(4 Marks)
b) Explain the historical development of microfinance internationally and locally
(8 Marks )
c) Despite the fact that microfinance has become something of a cause to celebrate for its
potential to help the developing world, there are some serious and credible criticisms of its
success. Discuss
(11 Marks)
QUESTION THREE (23 MARKS)
FINANCIAL Discrimination Against Women Occurs For Many Reasons.
a) Why do you think it has been so persistent over time?
b) Explain how microfinance
(10 Marks)
can not only benefit women in Kenya but empower them
financially.
(13 Marks
QUESTION FOUR (23 MARKS)
Evidence of growth and increasingly significant role by microfinance and microcredit institutions in
Kenya have led to the need of regulating this financial market segment.
Describe the arguments for and against regulation of MFIs in Kenya.
(23 Marks)
QUESTION FIVE (23 MARKS)
a) What is Self Help Group?
(4 Marks)
b) Explain its importance as used in microfinance.
(8 Marks)
c) Many self help groups in Kenya face a number of challenges in trying to uplift each other
socially and financially. Giving examples describe the problems related to SHGs? (11 Marks)
QUESTION SIX (23 MARKS)
The World Council of Cooperative Societies which is a regulator of all cooperatives and MFI inclusive
developed tools for measuring performance. Explain the tools highlighting whether they are used in
Kenya in measuring MFI performance
(23 Marks)
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