Micro-credit and Poverty Reduction Among Self Help Groups Within Kisumu County, Kenya

Abstract

Micro-credit is an informal source of revenue that was established to bridge the gap between Commercial banks and Formal Micro-finance institutions with an objective of providing small loans to the poor who were discriminated against due to their economic conditions. The research was mainly anchored on Grameen model which focused on funding the poor without collateral and vicious cycle of poverty theory which view poor people as vulnerable hence need to be supported to come out of poverty that is heavily grounded. The aim of this study was to evaluate the relationship between micro-credit and poverty reduction among self-help groups in Kisumu County. The study relied on primary data collected using semi-structured questionnaire and observation check with the help of research assistants drawn from Organization staff and group officials. The data collected was analyzed by both quantitative and qualitative methods with the help of SPSS version 20 and excel package. The findings portray mixed results since microcredit reduces poverty to a certain level beyond which it starts raising again as measured by changes in the annual income before and after loan acquisition. The impact of loan was moderate on both the living standard and business expansion despite of the majority attending trainings related to micro-credit and poverty reduction. Main challenges experienced related to loan include inadequate capital and training, high interest rate on loans and lack of information on the cost of loans thus limiting the potential of many. The researcher recommends more training to enhance their intellectual capacity since most have only attained basic education. Training is perceived to be essential for them to enhance their earning potential by minimizing risks related to book keeping, business management and financial management. In addition the government should develop business friendly policies for businesses to prosper both locally and at global range through networking. Financial institutions should develop friendly operation terms to attract more clients who are unable to meet their credit access condition. The study at hand used cross-sectional method and also focused only on credit recipients attached to a specific organization thus the findings may lead to subjective biasness The researcher therefore recommends further study on the topic using Longitudinal method to achieve significant results over a period of time especially in Kisumu County where few literature exist on the topic. Other studies should be carried out on micro-credit and market linkage and also on micro-credit and capacity building programs on the economic performance of SHG members as far as poverty reduction is concerned.