CONTRIBUTION OF MICROFINANCE CREDIT TO POVERTY REDUCTION AMONG THE RURAL WOMEN IN KEIYO NORTH SUB-COUNTY, ELGEYO-MARAKWET COUNTY, KENYA

ABSTRACT
The main purpose of microfinance credit programme is to break the vicious cycle of poverty among the rural women by providing them with capital. Poverty is a global problem; more than 1.3 billion people worldwide live below the poverty line, 70% of them being women. In Keiyo North Sub-County, 48% of the population lives below the poverty line with women constituting 65% of those living below the poverty line. However, few rural women (220) in Keiyo North Sub-County participate in the microfinance credit programme despite the fact that Kenya Women Finance Trust (KWFT) operates in all the 13 sub-locations in the district. This study sought to investigate the contribution of microfinance credit on poverty reduction among the rural women in Keiyo North Sub-County. The study used a descriptive survey design to collect data. The target population was 220 rural women participating in 17 groups in KWFT microfinance credit programme from which a sample of 130 rural women was drawn. An open and close-ended questionnaire was used. A pilot study was conducted among the 30 KWFT rural women participants and a Cronbach’s Apha coefficient reliability of 0.71 was attained. The validity of the instrument was ascertained by experts from Agricultural Education and Extension in the Faculty of Education and Community studies and Faculty of Environmental Science of Egerton University. Data was analyzed using chi- square α=0.05 significance level. Results indicated that microfinance credit programme has improved household level of income among the rural women in Keiyo North Sub-County. Microfinance credit has enabled rural women to afford their children’s education and acquire new assets for their households. The rural women can also afford health care services for their families as a result of participating in microfinance credit programme. The study recommends that Kenya Woman Finance Trust (KWFT) officials should encourage more rural women to participate in microfinance credit programmes to increase levels of income and savings in their households. They should also make a follow up on the 0.8% of the rural women who could not afford healthcare services even after recording an increase in their income. The Members of County Assemblies (MCA’s) and the Chiefs of the 13 locations where KWFT operate should sensitize rural women to participate in MFI’s programmes in order to reduce their poverty levels.

CHAPTER ONE
INTRODUCTION
Background of the Study
Microfinance credit programme provides small loans to poor people for them to improve their living standards. It is not charity, but investment. The main purpose of microfinance credit is to break the vicious circle of low income, low investment and low profit by inserting capital from outside into the economic life of poor people (Yunus, 2010, p. 48). According to Adam & Bartholomew (2010, p. 24) “money, says the proverb, makes money. When you have got a little, it is often easy to get more and the great difficulty is to get the little”. Microfinance credit programme provide the little money where there is total absence of capital or profit, where living is based on subsistence only (Microcredit Summit, 2005).

Poverty is a global issue. Despite changes in development paradigms in the last few years, the promise to bring wellbeing to all people remained unfulfilled (World Bank, 2008). As it stands, more than 100 million children of primary school age have never stepped inside a classroom, about 29000 children die each day from largely preventable malnutrition and disease and more than 1.3 billion people in the world are struggling to survive at the margin of human existence “on under a dollar a day” (World Bank, 2008). Moreover, 70% of the 1.3 billion living on less than a dollar day are women (UNECA, 2010). Poverty is a problem facing the countries irrespective of their level of development. It can be observed in many forms. It has both income and non-income dimensions. It may be lack of income or resources, lack of coping capacity, lack of basic human capabilities or in extreme cases, lack of all these. In a wider sense, it may be a combination of economic, social and political deprivations (UNDP, 2008). In Kenya, 46% of the country’s population of 40 million lives below the poverty line (Odieki, 2011). Keiyo North Sub-County, with a population of 73,715 people has 48% of the people living below the poverty line while 65% of them are the rural women (Keiyo North District Strategic Plan, 2010).

According to the Education For All Decades Assessment Report presented by the then Minister of Education Hon. Mutula Kilonzo on 25th July, 2012 at the Hilton Hotel in Nairobi,shows that high poverty levels have kept 800,000 school-going children out of the free learning programme, a decade since the government introduced the free education programme in 2003 (Mwendwa, 2012).

Women, especially, rural women suffer not only from abject poverty but also from socio- economic inequality in the society (Grameen Bank, 2009). They are the most deprived section of the society and majority of them are extremely poor, moreover, providing women with access to credit can turn around an entire economy because of two reasons. First, there is significant evidence that when a woman’s business succeeds and she makes a profit, it all goes to her family, secondly, studies show that children are better educated and cared for when women contribute income to the family (Grasmuck and Espinal, 2011). In this situation microfinance credit programme has emerged as an important financial instrument to reduce poverty among the rural women (Ahsan, 2005). This emergence was re-enforced in October 2005 by the United Nations, when they declared 2005 as the international year of microcredit. The United Nations, during the microcredit summit of 2005, also recognized microfinance credit as a tool for achieving the Millennium Development Goals (MDGs). The MDGs are globally accepted strategies geared towards the reduction of extreme poverty worldwide by 2015, in addressing the issues of income levels, education, hunger, diseases, shelter, poor infrastructure, gender inequality and environmental degradation (Microcredit Summit, 2005).

The microfinance credit is the provision of small loans to individuals, usually within groups, as capital (Weber, 2006). Among the 81.9 million poor clients served by microfinance credit programmes worldwide, 84.2% are women (World Bank, 2005). Kenya has the second best business environment for microfinance institutions in all of Africa and is one of the top ten in the world (EIU, 2010). It is also the second largest borrower base in the continent with over 100 organizations, including about 50 Non-governmental organizations (NGOs) engaging in some form of microfinance business in Kenya. The major players in the sector include Faulu Kenya, Kenya Women Finance Trust (KWFT), Kenya Agency to Development of Enterprise and Technology (KADET), (MIX and CGAP, 2010)

Controversy though, surrounds the contribution of microfinance credit on poverty reduction among rural women. As Kiriti (2007) and Mayoux (2006) have pointed out that microfinance credit has negative impact on poverty reduction among the rural women whereas, Kandker, (2009) and Kondo et al. (2008) support the argument that microfinance credit contributes positively towards poverty reduction among the rural women. On positive contribution, microfinance credit is claimed to reduce poverty by increasing food consumption among the rural women and their families, improves children’s schooling, nutrition, increases income and self-employment (Pitt et al. 2006). Ali (2008) conducted a comparative study on poverty reduction among the rural women participants of microfinance credit and non-participants and found a sharp reduction in the number of participants living below the poverty line (20%) compared to non-participants (56%). According to Navajas (2011), women tend to invest their income from microfinance related enterprises in the education of their children; as a result, literacy levels become higher in the families.

A study by Dupas and Robinson (2009) in Kenya found that the savings of rural women participating in microfinance credit programmes, increased significantly by a minimum of 40%, with significant increases in personal expenditure such as assets, food, health care and education. Kondo et al. (2008) revealed that microfinance credit contributes to an increased income though it found no effect on education and health care indicators. Moreover, microfinance credit is beneficial to women as it leads to an increase in school enrolment among school going children (Kandker, 2009). Microfinance credit also helps poor women to cope with financial risks from illnesses resulting from the cost of medical care and loss of income during illness (Gertler et al. 2008).

Sultana and Hassan (2010) in their study pointed out that women who had access to microcredit experienced income rise and increase in the women’s ownership of productive assets (cattle, goats, poultry, etc.) and non productive assets (TV/radio, solar and other households’ goods) because they could afford such assets through profits generated from their micro enterprises. The Women’s Entrepreneurship Development Trust Fund reported that women increased income benefit the children, particularly in the provision of education, health care, improved diet and clothing (Cheston & Kuhn, 2002).

However, other studies have shown negative impact. Mayoux (2006) argues that microfinance credit leaves rural women borrowers highly indebted, and no much wealth to show for it. There is little evidence of radical change in the gender division resulting from rural women access to loan as they still do traditional home-based jobs like small scale poultry keeping (Kabeer, 2005). Kiriti (2007) argues that microfinance credit tends to indebt women leaving them more vulnerable. Wrenn (2005), states that microfinance credit among rural women leads to increased work load, increased domestic violence and abuse.

In Bosnia, World Bank researchers found that up to 50% of micro enterprises failed within one year of establishment, stripping the rural poor women of all their remaining assets leaving them poorer than they were (Demirgue-kunt, 2009). Results by Diagne and Zeller (2011) in their study, also suggested that microfinance credit did not have any significant effect on household income among rural women. In other extreme cases, it was reported that women committed suicide in the village of Andhra in India after failing to repay the microfinance loans (New York Times, 2010). According to Kiriti (2007), these mixed results of contribution of microfinance credit on poverty reduction among the rural women seem to have discouraged the rural women from participating in microfinance credit programme. The study therefore sought to investigate the contribution of microfinance credit towards poverty reduction in Keiyo North Sub-County.

Statement of the Problem
Microfinance institutions provide credit to the rural women in an effort to reduce the number of poor rural women in Keiyo North Sub-County by providing them with capital to start businesses. KWFT operates in all the 13 sub-locations of Keiyo North Sub-County with the aim of providing the rural women with small loans without collateral for them to improve their living standards. However, few rural women (220) are currently participating in the KWFT credit programme with majority of them being reluctant to borrow loans. There is also limited information on the contribution of microfinance credit on poverty reduction among the rural women who are participating in the microfinance credit programme. This study, therefore, sought to investigate the contribution of microfinance credit on poverty reduction, comprising of the following parameters, household income, asset acquisition, affordability of health care, affordability of education for their children among the rural women in Keiyo North Sub-County.

Purpose of the Study
This study was designed to investigate the contribution of microfinance credit in reducing poverty among the rural women in Keiyo North Sub-County.

Objectives of the Study
The objectives of the study were to:
i. Discuss the total amount of loan borrowed by each rural woman since joining the microfinance credit programme.

ii. Describe the contribution of microfinance credit on household income among the rural women in Keiyo North Sub-County.

iii. Identify the contribution of microfinance credit on acquisition of assets among the rural women in Keiyo North Sub-County.

iv. Examine the contribution of microfinance credit on affordability of health care among the rural women in Keiyo North Sub-County.

v. Determine the contribution of microfinance credit on affordability of education for the children of the rural women in Keiyo North Sub-County.

Research Question
The following research question was derived from objective one.

i. How much loan in total has each rural woman borrowed since joining the Microfinance credit programme?

Hypotheses of the Study
The following hypotheses were derived from objectives ii, iii, iv and v respectively.

Ho1: There is no statistically significant contribution of microfinance credit on household income among the rural women in Keiyo North Sub-County.

Ho2: There is no statistically significant contribution of microfinance credit on acquisition of assets among the rural women in Keiyo North Sub-County.

Ho3: There is no statistically significant contribution of microfinance credit on affordability of health care among the rural women in Keiyo North Sub-County.

Ho4: There is no statistically significant contribution of microfinance credit on affordability of education for the children of the rural women in Keiyo North Sub-County.

Significance of the Study
The study has provided information on how microfinance credit has contributed to rural women’s income level, asset acquisition , education of their children and affordability of health care.

The study has also provided useful information to KWFT officials on their contribution to poverty reduction among the rural women in Keiyo North Sub-County and in Kenya. The County leaders can also use the information to encourage more women to overcome their fears of loan taking and join the KWFT and other microfinance institutions.

Scope of the Study
The study focussed on rural women who are clients of KWFT in Keiyo North Sub-County. The selected factors measured were household income, acquisition of assets, affordability of health care and affordability of education for the children.

Assumptions of the Study
The following was the assumption of the study:

i. The respondents selected in the sample would accept to fill in the questionnaire.

Limitations of the Study
The following were the limitations of the study

i. Some rural women were unable to read and write, therefore, filling the questionnaire was a problem. The researcher overcame this limitation by translating the items in the questionnaire to them in the local language and filled in the questionnaire himself.

ii. The study was limited by the fact that it covered only rural women in Keiyo North Sub-County; therefore, any generalizations made from the findings should be done with caution.

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