Impact Of Microfinance Services On Poverty Alleviation At The Household Level

70 Pages·2016·2.69 MB·English

IMPACT OF MICROFINANCE SERVICES ON POVERTY ALLEVIATION AT THE
HOUSEHOLD LEVEL
BY
KARURI SOLOMON WAIGANJO
A Research Project Presented in Partial Fulfillment of the requirements of the degree of
Master of Business Administration University of Nairobi
OCTOBER* 2010
DECLARATION
This research project is my original work and has not been submitted for examination in any
other university.
KARURI SOLOMON WAIGANJO
D61/70363/2008
Signature:
This research project has been submitted for examination with my approval as the university
supervisor.
SUPERVISOR: MR. LUTHER OTIENO ODHIAMBO
Signature: Date 0 °
ii
DEDICATION
I dedicate this work to family for the sacrifice they made for me to complete this project. Their
love, care, concern, support, encouragement and enthusiasm inspired me to achieve this goal.
iii
ACKNOWLEDGEMENTS
I take this opportunity to thank God for good health and for bringing me this far. I also want to
extend special gratitude to my supervisor, for the great partnership we made. His guidance,
encouragement and patience in reading, correcting, re-reading and refining this work is
commendable.
/
IV
ABSTRACT
Microfinance programs are increasingly publicized as one of the most successful tools for
development with the ability to positively affect its participant’s economic and social status.
Measuring this impact can be difficult, and the programs have been criticized for not reaching
the poorest of the poor. Various approaches to advance credit for micro and small enterprises
have been tried in Kenya by different institutions with varying degrees of success or failure.
Major approaches include: minimalist versus integrated approaches; group-based lending versus
lending to individuals; village banking and linkage programs. Microfinance is becoming one of
the most popular tools for development. It is important to understand the effects of microfinance
programs are participants, but also its possible effects at reducing poverty and leading
development.
The objective of this study was to evaluate the effects of microfinance programmes on poverty
alleviation at the household level. This research study employed a survey research method to
achieve the set objectives. The population of the study consisted of beneficiary households of
microfinance programmes in Kisumu. This research study used purposive sampling to select
households to be studied. A sample of 50 households who have benefited from microfinance
programmes was selected and another 50 households who have not benefited from microfinance
programmes were picked for comparison. The primary data was collected using structured
questions and unstructured questions. Descriptive statistics such as means, standard deviation
and frequency distribution were used to analyze the data. Data presentation was done by the use
of pie charts, bar charts and graphs, percentages and frequency tables.
From the findings of the study the study recommends that MFIs should ensure speedy processing
of loans to customers and increase monitoring of income generating activities to see their
progress and challenges. MFIs should ensure that they reach out many rural poor and increase
awareness of their products to community level and also provide soft loans for their customers.
MFIs should introduce entrepreneurial training in the rural-urban areas to enlighten people on
microfinance programmes.
TABLE OF CONTENTS
DECLARATION........................................................................................................................................ii
DEDICATION............................................................................................................................................iii
ACKNOWLEDGEMENTS.......................................................................................................................iv
ABSTRACT.................................................................................................................................................v
TABLE OF CONTENTS...........................................................................................................................vi
LIST OF FIGURES...................................................................................................................................ix
LIST OF TABLES......................................................................................................................................x
CHAPTER ONE: INTRODUCTION........................................................................................................1
1.0 Introduction...................................................................................... 1
1.1 Background of the study.......................................................................................................................1
1.1.1 Micro finance services..................................................................................................................1
1.1.2 Micro finance institutions in Kenya................................................ 3
l .2 Statement of the Problem....................................................................................................................4
1.3 Objectives of Study.............................................................................................................................6
1.3.1 General Objectives of the Study...................................................................................................6
1.4 Importance of the Study......................................................................................................................6
CHAPTER TWO: LITERATURE REVIEW..........................................................................................7
2.1 Introduction.........................................................................................................................................7
2.2 Empirical review.................................................................................................................................7
2.3 The Structure of the Microfmance Sector in Kenya..........................................................................11
2.4 Effects of Microfmance programs.....................................................................................................13
2.5 Theoretical Framework.....................................................................................................................15
2.5.1 Poverty as cultural characteristics..............................................................................................15
2.5.2 Poverty as a label......................... 15
2.5.3 Poverty as restriction of opportunities................................................. 16
2.6 Service delivery approaches........................................... 16
2.6.1 Savings services.............................................................................. 18
VI
2.6.2 Loan products....................................................................... 19
2.7 Impacts of Microfinance Programs...................................................................................................20
2.8 Contribution of microfinance programs in Kenya.............................................................................21
2.8.1 Poverty alleviation......................................................................................................................21
2.8.2 Curbing unemployment..............................................................................................................21
2.8.3 Retain and strengthen the capacity of field trainers.............. 22
2.9 Conclusion.........................................................................................................................................23
2.10 Variables of the study......................................................................................................................23
2.11 Conceptual Framework...................................................................................................................24
CHAPTER THREE: RESEARCH METHODOLOGY........................................................................25
3.1 Introduction.......................................................................................................................................25
3.2 Research Design................................................................................................................................25
3.3 Target population.................................................................................................. 25
3.4 Sample size and sampling technique.................................................................................................25
3.5 Data collection instruments...............................................................................................................26
3.6 Data analysis................................................................. 26
3.7 Data reliability and validity.............................................................................. 26
3.8 Ethical considerations........................................................................................................................27
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION OF FINDINGS........................28
4.1 Introduction......................................................................................................................................28
4.2 General information..........................................................................................................................28
4.3 Effects of microfinance programmes on poverty alleviation............................................................30
4.4 Regression analysis...........................................................................................................................38
CHAPTER FIVE: DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS__________41
5.1 Introduction.....................................................................................................................................41
5.2 Discussions of Key Findings...........................................................................................................41
5.3 Conclusions.......................................................................................................................................42
5.4 Recommendations.............................................................................................................................43
5.5 Recommendations for further research studies.................................................................................43
References...................................................................................................................................................44
APPENDICES............................................................................................................................................50
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LIST OF FIGURES
Figure 4. 1: Gender of the respondents......................................................................................................28
Figure 4. 2: level of education.....................................................................................................................29
Figure 4.3: Duration of time in the study area...........................................................................................29
Figure 4. 4: Financial services and increased household income levels......................................................31
Figure 4. 5: MFI programs create employment among the poor..................................... 32
Figure 4. 6: Opening of a new venture in the last one year.........................................................................35
Figure 4. 7: Entrepreneurial training or work related skills for the last one year........................................36
Figure 4. 8: Technical assistance on business venture................................................................................37
Figure 4.9: Future prospects for microfmance programmes.....................................................................38
IX
LIST OF TABLES
Table 4. 1: Ways that MFIs use to deliver financial services.....................................................................30
Table 4.2: Result of MFI programs............................................................................................................33
Table 4.3: Respondents’ annual expenditure..............................................................................................34
Table 4. 5: Source of training......................................................................................................................36
Table 4.6: Number of times the respondents get training per month........................................................37
Table 4. 7: Coefficients...............................................................................................................................39
x