An assessment of subsidy dependence index for self sustainability of micro-finance institutions in Kenya: a case study of Kabete Constituency
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Date
2013-01-15
Authors
Kamau, David Maina
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Abstract
This study was carried out to identify the sustainability of Microfinance (MFls) institutions in
Kenya in funding micro and small scale enterprises (MSE's) in Kabete Constituency. The
Primary data was collected by use of questionnaires, which consist mostly of closed and open
ended questions. An Interview was conducted on specific areas, through pre-determined
questionnaires.
The population target for the study comprises of all managers in MFI's in Kabete constituency
and its environs. The sample for study was drawn by the use of stratified and purposive
sampling technique. The findings indicate that most of the Microfinance institutions are retail
Microfinance institutions catering mostly to the lower income groups in society. Only a few
were wholesale MFI'S and insurance companies indicating the low penetration rate of the
services they offer among the Kabete population. The findings also indicate that majority of the
MFls rank their rate of interest as relatively fair while only a few consider the interest rates they
charge on loans to be either low or high. Most micro finance institutions regard their spread as
relatively moderate. Half of the micro finance institutions sampled had a good loan collection
rate with very few having a high rate of loan defaulters. Sustainability of MFls in Kenya showed
that all the respondents had experienced positive growth in their savings and loans growth rate.
The increased savings and loans mean that there is still room for growth in the micro lending
sector. Majority of the micro finance institutions reported a very high member ship of rural
clientele indicating that people .from rural areas are the target market for most microfinance
institutions. Majority of the microfinance institutions had a very high borrowing rate from
women. Majority of the MFls sampled reported that, the average amount of money lent to each
of their client is relatively low. Most MFI's target numbers rather than amounts with the
rationale that huge numbers of people each depositing small amounts of money will eventually
results in huge amounts of reserves which can then be lent out to other people for business
expansion purposes at an interest. This enables the MFI's achieve self sustainability since as
more people seek loans, more interest is paid to the institution enabling it to take care of its
operational costs and reduce dependence on subsidies. All the managers interviewed were of the
opinion that Microfinance institutions can achieve sustainability by employing a variety of measures.
Description
Department of Accounting and Finance, 59p. The HG 178.33 .K4K3 2012
Keywords
Microfinance --Kenya --Kabete constuency, Small enterprises --Kenya --Kabete constuences