The Influence of Microfinance Services on the Financial Performance of Women-Owned Enterprises in Nakuru Central Business District

Abstract

Abstract Microfinance institutions play a crucial role in empowering women entrepreneurs by enhancing their decision-making abilities and improving their socio-economic status within households and communities. This study examined the influence of microfinance institutions’ services on the financial performance of women-owned enterprises in Nakuru’s Central Business District (CBD). Specifically, the study evaluated how savings, funding, advisory, and insurance services offered by microfinance institutions affect enterprise financial outcomes. The study was grounded in the Resource-Based Theory, Microfinance Credit Theory, Risk Management Theory, and Modern Portfolio Theory, which collectively provided a robust conceptual framework for understanding the contribution of financial and non-financial services to business performance. A descriptive research design guided the study. The target population consisted of 1,800 women-owned enterprises operating within Nakuru’s CBD, from which a sample of 200 respondents was selected using stratified random sampling to ensure adequate representation across various business categories. Data were collected using structured questionnaires. A pilot study conducted in Eldoret City enhanced the instrument's reliability and clarity. Validity was established through face and content validation. At the same time, reliability was confirmed using Cronbach’s Alpha, with all variables achieving an overall reliability coefficient of 0.851, well above the acceptable threshold of 0.7, indicating strong internal consistency. Quantitative data were analyzed using descriptive and inferential statistical approaches. Descriptive statistics included means, percentages, frequency distributions, and standard deviations, while regression analysis formed the basis of the inferential assessment. Findings revealed that all four microfinance services had a positive, statistically significant effect on financial performance. Savings services (β = 0.199; p = 0.012), funding services (β = 0.507; p = 0.000), advisory services (β = 0.434; p = 0.000), and insurance services (β = 0.270; p = 0.000) each contributed significantly to enhancing the financial performance of women-owned enterprises. These results highlight the importance of efficient savings mobilization, favorable access to loans, reliable advisory support, and adequate insurance coverage in fostering business growth and sustainability. While insurance premiums were noted to be relatively high, insurance services still played a vital role in reducing business risks and supporting continuity. The study recommends strengthened savings sensitization initiatives, flexible collateral requirements, and collaboration between microfinance institutions and local authorities to provide training in record keeping, financial planning, and marketing. Furthermore, greater awareness of insurance options is necessary to enhance business resilience.