Influence Of Selected Human Resource Management Practices On Performance Of Microfinance Institutions In Nairobi County, Kenya

Abstract

Strategic alignment of HR functions such as recruitment process, training development program, competitive reward systems, and employee participative mechanism with organizational goals significantly boost operational efficiency, employee satisfaction and long-term competitiveness particularly within financial services sector. Despite extensive literature on HR practices, significant conceptual, contextual and methodological gaps persist, especially concerning their application in microfinance sector. The study focused on four key HR dimensions: recruitment process, training dvelopmet program, competitive reward system and employee participative mechanism. A correlational research design was adopted, targeting 10 MFIs licensed by Central Bank of Kenya as the unit of analysis. The unit of observation were 247 employees working in MFIs. Using stratified random sampling and Taro Yamane’s formula, 153 respondents were selected. Data collection was collected using both Google Sheets and physical questionnaires. Quantitative data was analyzed using descriptive statistics (frequency, mean, and standard deviation) and inferential methods, particularly multiple linear regression and correlation analysis at a 0.05 significance level. Qualitative data from open-ended questions were analyzed using content analysis. The study findings revealed significant and positive relationship between HR practices and MFI performance. The study concluded that HR practices have significant influence on MFI performance in Nairobi County, Kenya. The study recommended that MFIs strengthen their recruitment processes to attract top talent that aligns with organizational goals, MFIs should focus on developing tailored training programs to enhance employee skills and improve performance, MFIs need to establish robust reward systems that include both financial and non-financial incentives to motivate employees and boost performance, the study recommended encouragement of Employee participative mechanisms in decision-making to bolster organizational performance. Future research could investigate further the role of organizational culture and its influence on HR practices and performance outcomes, Examining how different cultural aspects within MFIs influence employee motivation, satisfaction, and overall performance could offer valuable insights.