Effect of Social Entrepreneurship Practices of Micro Financial Institutions on Poverty Reduction in Eldoret, Kenya

Abstract

The main objective of this study was to investigate the effects of social entrepreneurship practices by micro finance institutions on poverty reduction. To achieve this, the study was guided by two objectives; to determine the extent to which the MFIs in Kenya have implemented social entrepreneurship practices and to establish the effect of social entrepreneurship practices on poverty reduction in Eldoret, Kenya. This study considered that services and products provided by MFIs are the major channels through which poverty reduction can be achieved. In carrying out the study, the beneficiaries of 7 Micro-Finance Institutions were involved. 100 questionnaires were distributed and later collected for analysis, interpretation and analysis. From the study, the main services offered by the MFIs were loans, financial advice and micro insurance. The products offered were individual loans, chama loans and agribusiness loans. The most preferred service and product for economic status improvement were loans and chama loans respectively. Through these services and products, the study has shown that clients were able to increase the level of income, start new business, purchase new machinery and increase farming output. The study also found out that most of clients enjoyed the customer support service from MFIs and this made it easier for them to engage the MFIs. The main challenge attributed to failure in total practice was the many cases of defaulters. Through the correlation analysis of the services provided and the range of income increase, it is clear that the services provide helped reduce the level of poverty among the beneficiaries. It is observed from the study findings that there is a strong relationship between the products and services offered by MFIs and the level of poverty eradication through income generation. It‟s also been observed by offering services and products, MFIs have enabled many people start business, improve their saving knowledge, purchase new farming machinery and build modern homes. There is need for studies to be carried further to determine whether there is any association between the policies by CBK and poverty reduction. Another issue that needs to be investigated is the lasting effect of the benefits provided by MFIs. Further research may be needed to study the relationship between individual sub-indicators and the social performance of an MFI.