MODERATING EFFECT OF REGULATORY ENVIRONMENT ON THE RELATIONSHIP BETWEEN STRATEGIC RISK MANAGEMENT PRACTICES AND FIRM PERFORMANCE IN THE CONTEXT OF VISIONFUND IN TANZANIA
Erica F. Nyange - School of Business and Economics, Daystar University, Kenya
Dr. Eunice Ngina Wandiga(PhD) - School of Business and Economics, Daystar University, Kenya
ABSTRACT
Microfinance Institutions (MFIs) in Tanzania face significant challenges largely related to risk management, which have contributed to higher loan default rates. Weak compliance with regulatory frameworks has often undermined the MFIs’ financial stability and increased exposure to operational and reputational risks, which has highlighted the critical importance of strict adherence to these regulations. The purpose of the study was to test the moderating effect of the regulatory environment on the relationship between strategic risk management practices and firm performance at VisionFund, Tanzania. The study was anchored on the Enterprise Risk Management (ERM) Model, Balance Scorecard Model, and Institutional theory. Positivism philosophy guided this study, and adopted both descriptive and explanatory research designs. The target population included all 103 employees of VisionFund, Tanzania, drawn from senior management, functional management (regional and program managers), and operational levels (supervisors). The study adopted a census approach, and data collection was done via a structured questionnaire. The pretest was done on 10 employees from FINCA Microfinance Bank. Construct and content validity were tested, while reliability was tested using Cronbach’s Alpha Coefficient with a threshold of 0.7. Data were analyzed using SPSS 27.0, where descriptive statistics (means, standard deviations, and percentages) and inferential statistics (Pearson correlation and hierarchical regression analysis) were conducted. Hayes (2018) approach was utilized to determine the moderating effect of regulatory environment on the relationship between strategic risk management practices and the firm performance of MFIs in Tanzania. The findings revealed that the interaction term between strategic risk management practices and regulatory environment produces a significant Beta coefficient of 0.231 (p=.002), affirming that the regulatory environment has a positive and significant moderating effect on the relationship between strategic risk management practices and firm performance at VisionFund, Tanzania. The study recommends that VisionFund should enhance its compliance frameworks with the Bank of Tanzania to reinforce credibility and reduce risks.