Microfinance and sustainable household development in the north rift region, Kenya

Abstract

The Microfinance sector has enjoyed overwhelming support and acceptance from the international development agencies and major donors. In Sub-Saharan Africa there has been rising trend in establishment and expansion of microfinance institutions whereby the primary direct beneficiaries are members of a household. However, the actual contribution of microfinance institutions on sustainable household development variables has not been conclusive due to its potential and possible significant indirect effects thus the need for the study. The study examined effects of micro financial attributes on sustainable household development variables in the north rift region of Kenya, by identifying the micro financial attributes; assessing the effects of the attributes on household development besides establishing the challenges associated with the use of microfinance services on household development and possible remedies. The study affirmed Sen.’s capability and functionality theories of development as very critical as it lays emphasis on the ability to convert commodities under ones possession into actual function and capability advantage. The target population comprised members of households who had been a beneficiary of Microfinance institution for more than four years in North Rift Region. The sample size was determined using simple and purposive sampling technique under stratified sampling method. Descriptive survey research was employed and the instruments of data collection used were questionnaires and structured interviews. The findings were analyzed by use of descriptive and inferential statistics. It was established that micro financial main attributes in the north rift region were: microloans, savings and trainings. The outcome with respect to the Pearson Chi-Square correlation test on the findings, confirms a significant positive effect of microfinance attributes on households development variables hence potentiality in its functionality and capability to transform lives and livelihoods of members of households, thereby enhanced sustainable household development. Therefore the findings contradict prior thought of non-existence of the relationship between microfinance attributes and sustainable household development. In spite of its immense contribution, a number of challenges were noted which can be mitigated upon for instance by: public awareness, additional efficiency, additional tax incentives as well as emphasis on securing proper funding levels to the sector; entrepreneurial knowledge and skills are critical thus bridging existing gap through financial training deserve prioritization.