Access to Credit and Household Savings in Kenya Evidence From Kenya National Finaccess 2019 Survey

Abstract

Over the years, policy makers have embraced financial inclusion as a key policy and development tool. An inclusive financial system boosts savings, resilience to economic shocks, credit uptake hence investments, general welfare, economic growth, and poverty reduction efforts. For that reason, there have been concerted efforts amongst policymakers to promote financial inclusion across the globe. This has led to a global increase in the proportion of the financially included individuals. This study sought to investigate the effects of access to credit on household savings in Kenya. Specifically, the disaggregate access to credit facilities and usage of savings products, the effects of access to credit on household savings and other determinants of household savings in Kenya using the 2019 Kenya National FinAccess survey data. Estimation results revealed a negative effect of access to credit on household savings in Kenya. Other significant determinants of household savings in Kenya were income, education, gender, and age of the household head. The study findings implied that governments should ensure proper regulation of credit lending institutions against exorbitant interest rates that crowd out savings, educate households on usage of loans for economic generating activities and not for mere consumption, and enforce savings-first approach to lending.