Gender, Access To Credit And Financial Health In Kenya: Lessons From Kenya National Finances Survey 2019

Abstract

Over the years, financial inclusion in Kenya has been improving and the gender gap in access to financial services has been narrowing. The finacess survey 2019 holds that despite the narrowing financial inclusion gap the national financial health has been declining, meaning that more men and women are unable to use financial products and services for daily needs, to cope up with shocks and risks, and to invest for future use. The co-existence of financial inclusion with poor household financial health forms the crust of the research problem in this study. The study has two main objectives: To analyse whether there is any relationship between sources of credit and household financial health; and to analyse the determinants of household financial health. We use Kenya National Finaccess Survey 2019 data and employ the Multinomial Probit and Probit models for analysis. The study considered four kinds of credit sources, (Formal, Formal others, Informal, and Excluded) where formal represents formal prudential, formal others refers to formal non prudential and formal registered, informal represent informal sources while excluded refer to those who seeks credit from friends, family and neighbours. We find that majority of the individuals seek credit from formal others. However, individuals accessing credit from formal others are less likely to be financially healthy compared those seeking credit from formal sources. Women are more likely to seek from formal other compared to men. Other findings from the study indicate that individuals with higher education and higher income are more likely to access credit from formal sources and are more likely to be financially healthy. However, we find an inconclusive result on whether gender is a determinant of the financial health of an individual. We recommend monitoring, transparency and customer protection in formal others (digital credit) market where majority of the credit consumers are financially unhealthy