Socio-economic Factors Influencing Access to Micro-credit in Kenya

Abstract

Kenya has witnessed a 50% increase in financial inclusion in the last decade. This growth has seen the percentage of the financially included people rise from 60.7 % in 2006 to 75.3% in 2015. Despite the growth, access to microcredit remains a challenge with only 31.4% of the populace accessing microcredit (FinAccess National Survey, 2016). Access to microcredit financing is paramount as it gives the low-income people the means to advance their lives and enables them to provide for their families. It also enables them to raise their household incomes, build on assets, and decrease their vulnerability to disasters. Women, rural residents and the poor have the least access to credit facilities in Kenya. This study, therefore, sought to empirically examine the factors that influence access to microcredit financing in Kenya. The study used the FinAccess Survey, 2016 dataset. Descriptive statistics and probit model were used for data analysis. The probit regression indicates that; gender, earnings and education level are positive and significant factors that influence access to microcredit financing in Kenya. Based on the findings, it is recommended that; MFIs should move towards a more gender-balanced portfolio to benefit all the poor; the government should also come up with policies that focus on factors that enhance access to education across all levels to ensure higher transition rates from primary to secondary and tertiary levels so as to boost productive capacity. Further, it is recommended that both the county and national governments should initiate schemes that would create permanent employment for the youth, women and the poor to enable them have a permanent and reliable stream of income.