Determinants of access to microcredit in Kenya

Abstract

Access to microcredit is paramount because it gives low-income people means to advance their lives and enables them to provide for their families and themselves not only in the short run but also in the long run. It also enables them to raise their household incomes, build on assets, and decrease their vulnerability to disasters. Despite the growth in Kenya’s financial sector and hence rise in the percentage of the financially included people, access to microcredit remains a challenge with only 22.6% of the populace accessing microcredit. Women, rural residents and the poor have the least access to credit facilities in Kenya. This study, therefore, sought to empirically examine the factors that determine access to microfinance credit in Kenya. The study used the FinAccess Survey, 2013 dataset. Descriptive statistics and probit model were used for data analysis. The probit regression indicates that being female; earnings, education level (primary, secondary, technical and university education), manufacturing and trade businesses are positive and significant determinant of access to microcredit in Kenya. Based on the findings it is recommended that; MFIs should move towards a more gender-balanced portfolio to benefit all the poor; the government should extend free education at all other levels i.e. secondary and tertiary levels to boost productive capacity. Further, it is recommended that both the county and national governments should initiate schemes that would create permanent employment for the youths, women and the poor to enable them have a permanent and reliable stream of income.