The financial and social impact of microfinance lending: a case study of K-rep bank’s Juhudi credit scheme in Kawangware region
The purpose of this study was to assess the impact of K-Rep bank’s Juhudi lending scheme on borrowers. The objectives were twofold, namely, to assess the extent of the financial and social impact of the Juhudi Credit scheme on low-income borrowers in Kawangware and to evaluate the challenges faced by the borrowers in complying with the requirements of the scheme. The conceptual model was the minimalist scheme as epitomized by the Grameen Bank. This is based on the concept of group lending without training. The model requires group members to live in the same village, have similar economic resources and be members of different households. These stipulations ensure that the members of the groups have equal bargaining power and ensure the groups function smoothly. Its loan policy, one of the most quoted pillars of its success, ensures effective peer pressure and makes members more objective in assessing loan requests. Peer pressure ensures that loans are used for purpose intended through group monitoring mechanisms and errant members are easily disciplined or dropped. The impact of microfinance on the poor and the challenges faced in lending to the poor were also reviewed. The study employed a case study design. The population of study was 1,080 persons out of which 108 respondents were sampled. Data was collected by means of a questionnaire. Data analysis employed descriptive statistics consisting of means and standard deviations. Factor analysis and Spearman Rho correlation was done to effectively analyze the relationship between the dimensions that defined the variables used to assess financial and social impact and demographic variables. Chapter four presents the data findings and discussions and chapter five presents the summary, conclusions and recommendations. The key finding was that Juhudi scheme has had a positive financial and social impact on the lives of the residents of Kawangware. This is manifest in the increased financial stability and ability to better afford essential services such as education. The scheme still faces challenges to do with the high interest rates charged on borrowings.