Effect of Market Alliance on the Performance of Microfinance Institutions in Rwanda

Charles Nshimiyimana
Department of Accounting and Finance, Faculty of Business Management
The Open University of Tanzania, Tanzania
Email: nshimiyimanac@gmail.com

Abstract: The intense competition and constantly changing market conditions in modern-day businesses prompt organizations to adopt in order for them to survive. Due to that microfinances are required to become more proactive and innovative to maintain their competitive edge. One of the solutions for microfinances to overcome challenges and remain competitive is the marketing alliance’s practice (Thomaz and Swaminathan, 2015). The study’s purpose was to assess the marketing alliance’s effectiveness on the performance of Microfinance Institutions in Rwanda. The target population was 491 MFIs, and a sample population of 220 was determined using Slovene’s formula. Primary data was collected by use of a questionnaire. Structural Equation Modeling (SEM) was used to establish the relationship between marketing alliance and performance of MFIs. The SEM results revealed that the regression coefficients for marketing alliance are significant with the p-values (p<0.05) meeting the cutoff point of 0.05. This shows that marketing alliance has a significant influence on the performance of MFIs. Further, SEM shows that the model was significant (𝜒2 = 52.113, 𝑝 < 0.05), with a reasonably close fit model since RMSEA value is <0.08, and the R2 of 0.71 showed that 71% of the changes in the performance of MFIs are due to marketing alliance as mediated by strategic alliance management. The results have both practical and theoretical implications. Since a positive relationship exists, it is recommended that policymakers, and managers/CEO in MFIs should promote marketing alliances as a tool for improving the performance of the organizations and boost the country’s economy.