Microfinance and Poverty Reduction in Selected Microfinance Institutions in Nairobi Kenya

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Date
2013-04
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Kampala International University, bachelors degree of Arts in Economics
Abstract
The purpose of the study was to show the relationship between micro finance and poverty reduction and how microfinance has led to reduction of poverty in Kenya. The main or general objective of the research was: I. To establish the contribution of micro-finance services in poverty reduction in Kenya. II. To identify the various micro-finance services offered by micro-finance institutions in Kenya. III. To identify the problems that hinder micro-finance services in Kenya. The target population that was accessible was 50 out of the total population of 400 recorded clients and staff of Nairobi branch, 44 was selected in order to achieve the required sample, this sample was obtained using slovene's formula. Primary data was collected using questionnaire method administered to staff and clients analyzed through the use of descriptive statistics and MS Excel and data was presented using tables and pie charts. The sample population was picked using stratified random sampling. This technique was used because it provided for inclusion in the sample of the various sub groups in the target population. The research instrument used were questionnaire where there these were structured and non structured and they aimed at getting all the necessary data from respondents. This method was used because it is helpful in obtaining specified quantitative and qualitative information with accuracy and completeness, interviews where the researcher used interviews to acquire information that was not easily obtained through questionnaires. Interviews were used because it saves time when the interview schedules are structured and you get the first hand information from the respondents and it enabled the researcher to probe more for clarification, documentary review was also used where it involved reading documents related to clients drop out and microfinance. The researcher used both the questionnaire and the general objectives to analyze the data, where he used gender that is both male and female where most of micro finance clients were female where 61% were women and above 38% were men. This shows that the initial objective of microfinance institutions of empowering the poor and rural women for self sustaining and improve their standard of living, the researcher used marital status of single, married, window and divorced to analyze data, age group was also used, education level, duration in the organization of staff; services offered by microfinance institutions, effect of microfinance services on poverty reduction and problem that hinder microfinance services, all based on questionnaire and objectives. The findings of the study revealed that many people were helped with micro finance services such as savings, loans, advisory services, insurance services among others. According to the findings these services helped people of Kenya in increasing their investment in small businesses which in tum creates their income and later will lead to a better standard of living. The findings of the study also revealed that micro finance services helped people of Kenya in reducing their level of poverty with over 74% of the respondents agreed though there a significant proportion is living below the poverty line. The study revealed that microfinance institution has promoted women's empowerment in the society with 75% such business and more women become self reliant and they are in position of running their own business independently. However, not all women have been in full position of self reliance, thus more needs to be done since some of the women are still poor. The study also revealed that microfinance institutions played a big role in linking their clients to the agricultural sector with over 68% of the respondents agreed by offering them agricultural loans. Conclusion, microfinance institutions play a major role in reducing poverty level to a lower level especially it helps low income households who are the most susceptible to poverty problems. Microfinance institutions provide services that are regarded important tools in alleviating poverty such as saving services, loan services, advisory services and insurance services. There is clear evidence that microfinance services have done a tremendous work in uplifting people's income and their standard of living though there are problems facing microfinance institutions in their bid to eradicate poverty such as people's inability to offer collateral security, lack of knowledge of micro finance institutions by the poor and shortage of funds that would be given to the poor. The recommendations that were put forward where there is need for micro-finance institutions to increase the amount of loan they offer to the society especially the women as it had been found out by the study that the amount given was not enough to establish viable enterprises and promote socio-economic development, the government should provide and maintain the basic infrastructure at reasonable cost to consumers, such as communications, education and roads, there is a need for employment programs, Legal and institutional reform.
Description
A Research Report Submitted to the College of Economics and Management in Partial Fulfillment of the Requirements for the Award of Bachelor of Arts in Economics of Kampala International University
Keywords
Microfinance, Poverty Reduction, Nairobi Kenya
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