The effect of credit reference bureau service on financial performance of deposit taking micro finance institutions in Kenya

The research investigate the effect of credit reference bureau service on financial \nperformance of deposit taking microfinance institutions in Kenya. A credit reference \nBureau is a company that collects information from various sources and provides \nconsumer credit information on individual consumers for a variety of uses. It is an \norganization providing detailed information on person’s credit history, including \ninformation on their identity, credit accounts and loans, bankruptcies and late payments \nand recent inquiries. The study reviews literature on financial performance and credit \nreference bureau and theoretical framework which consists of theories of financial \nperformance in relation to credit reference bureau. This study employed descriptive \ndesign that aims at establishing the effect of credit reference bureaus on the on financial \nperformance of Deposit taking microfinance institutions in Kenya. Target population was \n9 deposit microfinance institutions registered by the Central Bank of Kenya at 8th April \n2013. The study used secondary data available from the financial statements of the target \npopulation. The annual report and accounts for the last five years from 2009 – 2013 and \nother available from the relevant sources. The study used event analysis to show return \non assets on pre and post CRB implementation in 2009 which were presented on a graph \nand table for a period of 2 years before and 5 years after. The study employed linear \nregression model equation (2) to test Return on Assets and total number of defaulters at \nthe CRBs per year. The study found strong credit information sharing is therefore \nessential not only to individual prosperity, but also to a country’s overall economic \ngrowth. The study established that financial performance is rated with credit information \nsharing with the latter causing the former. The study also recommends that an open \nsystem needs to be enhanced to allow financial institutions as well as non-bank entities \nretailers, telecom and utility companies access to credit history of borrowers so as to \nknow which clients to serve and what differential price to charge to cover risks