The Effect of Microfinance Banking on Financial Inclusion in Kenya

Abstract

Financial inclusion has been identified as one of the key factors that accelerate the growth of any economy and alleviate poverty. Financially excluded population mainly relies on their limited savings and low earnings thereby hindering them from taking advantage of the available growth opportunities. This leads them to be trapped in their poverty levels and inequality becomes rampant.The study seeks to establish the effect of microfinance banking on financial inclusion in Kenya. Social capital, Financial Intermediation and the Modern Development theories have been reviewed in the literature review. For the empirical review, various studies have been reviewed as well.The determinants of the financial inclusion are group lending, individual lending, village banking and savings mobilization. One of the measures of financial inclusion used in the study is the number of bank accounts. The study used the descriptive research methodology and the target population was all the Microfinance Institutions that are registered with the Association of Microfinance Institutions. Data collection was done by the use of both the structured and unstructured questionnaires, while the analysis of date was done by the use of descriptive statistical tools and a multivariate regression analysis model. From the data analysis, it was concluded that the availability of micro banking facilities and a strong branch network are one of the factors that enhance financial inclusion.