MICROFINANCE SERVICES AND POVERTY REDUCTION IN RURAL AREAS; A CASE OF KITUI COUNTY, KENYA
Josephine Mutinda Mutua - Master of Business Administration (Finance Option) of Kenyatta University, Kenya
Dr. Geoffrey Mbuva - Kenyatta University, Kenya
ABSTRACT
Poverty is a cruel and unwelcome condition that affects people all across the world and its reduction is ideally an important goal. Most countries have given this agenda preeminence where by microfinance programs have been deemed one of the most important vehicles for reducing poverty. This study, therefore, sought to investigate the influence of microfinance services on poverty reduction in rural areas of Kitui County, Kenya. Specific objectives were; to determine the influence of microcredit on poverty reduction in rural areas of Kitui County, Kenya; to examine the influence micro savings on poverty reduction in rural areas of Kitui County, Kenya; and to determine the influence of empowerment programs on poverty reduction in rural areas of Kitui County, Kenya. The research study was informed by the three theories: microfinance theory of change, social capital theory and modern development theory. A descriptive survey research design was used. The target population was 5699 members of six microfinance institutions in Kitui County. The study used stratified random sampling method in this study to come up with a sample of 359 members. The study used structured questionnaires to collect primary data. Data collected was analyzed using statistical package for social sciences software and results generated in terms of descriptive (frequencies, percentages, means and standard deviation) and inferential statistics (Pearson correlation and multiple regression). The findings were presented using tables and figures. The study established that micro credit had an inverse statistically significant influence on poverty reduction with a one-unit change, resulting to .175 (p=.005) change in poverty reduction in the opposite direction. Micro savings influenced poverty reduction which was not statistically significant with one unit change, resulting to .064(p=.303) change in poverty reduction in a reversed manner. Lastly, empowerment programs had a negative influence on poverty reduction with a one unit change, resulting to .104 (p=.090) change in poverty reduction which was not statistically significant. The study concluded that microcredit had the greatest influence on the poverty reduction in rural areas of Kitui County, Kenya, followed by empowerment programs, while micro savings had the least influence to the poverty reduction in rural areas of Kitui County, Kenya. The study recommends that microfinance institutions should also be encouraged to reduce the gap between the rate of interest on savings deposit and the lending rate by mobilizing more savings from the formal sector, which continues to remain untapped. To build capacity among the County residents, the study recommends that the MFIs operating in Kitui County undertake regular and effective training especially on financial management courses so that the local can learn the best financial management skills and thus improve their welfare.