Determinants of Access to Personal Loans among Workers in Formal Employment, A case of Moi Teaching and Referral Hospital Staff

Abstract

Employees' access to personal loans has become a critical choice in financing their numerous financial obligations in today's economy. Employees face new challenges in obtaining adequate loans to meet their financial needs. This is due to the fact that employees' earnings may be low or they do not have the collateral required by banks to advance loans. Despite numerous research in the area of access to personal loans little attention has been given to the link between job security, employee income level, collateral and guarantors, credit history and access to person loans. The study sought to identify the determinants of access to personal loans among workers in formal employment, at Moi Teaching and Referral Hospital. The study was guided by the following objectives; to determine the effect of job security, employee income level, collateral and guarantors and credit history on access to personal loans. The theories that underpinned the study were; the contract and credit risk and default theories. The study used explanatory research design. The study targeted 3,780 Moi teaching and referral hospital staff on formal employment. The study used stratified sampling technique to select the employees where respondents were picked from. Random sampling was used to select the employees that constitute the sample size of 361. This study used questionnaires to collect primary data relevant to the study. Cronbach Alpha was used to determine reliability of the data instruments. Quantitative data collected was analysed using descriptive statistical techniques which included frequencies, mean, standard deviation. Pearson correlation was used to test correlation of the variables. Multiple regressions was used to test the hypothesis at 0.05 level of significant. The study results revealed that the overall regression model was significant and that job security, employee income level, collateral and guarantors and credit history explained 66.9% variation in access to personal loans. The study regression results also indicated that the determinants positively, negatively and significantly affected access to personal loans; job security (β=0.650, p=0.00), employee income level (β= -0.283, p=0.000), collateral and guarantors (β=0.307, p=0.000), and credit history (β=0.360, p=0.000). The study concluded that job security, collateral and guarantors and credit history had a positive and significant effect on access to personal loans, suggesting that an increase in these variables increases access to personal income and the employee income level had a negative and significant effect on access to personal loans, implying that an increase in employee income level reduces access to personal loans. The study recommended that employing Institutions management and boards should ensure that their employees’ jobs are secured because this enhances the access to loans from financial institutions. The study recommends that the same study be carried out in a different setting targeting different respondents in other institutions. The study was restricted to four determinants of access to personal loans and the study recommends that other studies can explore other possible determinants can affect access to person loans.