Effects of Micro Credit on Welfare of Households: The Case of Ainamoi Sub County, Kericho County, Kenya

Abstract

This study examined factors affecting access of micro credit, the levels availed and their effects on households’ incomes and expenditures in Kericho County, specifically in Ainamoi Sub County, Kenya. In the study area, different portfolios have been used to extend credit, suggesting ability to reach a wide section of all cadres of the population. However, the impact on the welfare across beneficiaries had not been established. This study sought to fill this knowledge gap. To capture this, a sample of 96 households which had accessed micro credit was compared with a similar number which had not accessed micro credit. Stratification of households was done according to their membership to microfinance institutions. Random sampling method was used to select loan beneficiary households. The data was collected by administration of a structured questionnaire and it was analyzed using the SPSS and other statistical techniques. Heckman selection model was applied to identify the factors and their effect on the level of participation of households in the micro credit. Difference in difference (DID) model was used to analyze the effects of micro credit on incomes and expenditure of households. From the findings, this study concluded that participation in microcredit program resulted in improvement of the beneficiaries’ quality of life. From the study, Policy implications were drawn for improving access and the levels of participation in micro credit programme.

Key words: Micro credit, Households, Heckman selection model, Difference in Difference.