Influence of Financial Leverage on Profitability of Micro Finance Banks In Kakamega County, Kenya
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 5
Abstract
Financial leverage is the ratio of debt and equity, which states the relationship between borrowed funds and owner’s funds in the capital structure of the firm. Studies from literature review confirms that firms that rely on only equity are referred to as unlevered firms while those that rely on both debt and equity are referred to as levered firms. Specific objective of the study was to determine the effect of debt equity on profitability of Micro Finance banks in Kakamega County. The research design used descriptive research design and the target population of the study consists of top and middle level managers of 4 microfinance banks in Kakamega County represented by 55 employees. The study was done on a census scale since data was collected using questionnaires. Data was then be analyzed using a regression analysis model with the help of SPSS version 21. Debt equity influence profitability of microfinance bank positively and it significantly accounted up to 88.6% change in profitability. The study recommended that managers need also to accompany improved loan averages with expanded services and effective follow-ups of loan recoveries as indicated by the existence of the relationship between financial leverage and profitability.
Authors and Affiliations
Agripina Butsili, Dr. Julius Miroga
Keywords
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- DOI 10.9790/5933-0905022430.
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