Effect of group lending on accessibility of micro credit facilities among low income households in Keiyo South Sub-County, Kenya

Abstract

The study sought to address the impact of group lending on accessibility of micro credit facilities among low income households in rural and sub-urban regions of Keiyo South Sub-county. The study specifically sought; to determine the effect of joint liability on accessibility of micro credit; examine the effect of group size on accessibility of micro credit; determine the effect of group members’ education on accessibility of micro credit and to establish the impact of group diversity on accessibility of micro credit. Agency theory was applied in the study to intuit how group co-borrowers reduce agency costs by acting as agents to the microfinance institutions. This study adopted a descriptive research design. The study was conducted in Keiyo South Subcounty in Kenya; the target population was members of registered social organizations of 779 groups. Random sampling was used in the study to select groups while purposive sampling technique was subsequently used to select the two participating members. The primary data for the study was obtained using structured questionnaires. Reliability test of the instruments was done using Cronbach alpha coefficient. Analysis of the data was done using descriptive and inferential statistics. Descriptive statistics specifically mean and standard deviation were applied in the study and inferential statistics were Pearson correlation coefficient to test linear relationship between dependent and independent variables, while multiple regression model using t-test and p-values were used to test the hypotheses. The study revealed that joint liability (β1=0.205, p value 0.000<0.05), group size (β2=0.458, p value 0.000<0.05) and group members’ diversity (β4=0.122, p value 0.032<0.05) had a positive and significant effect on accessibility of microcredit facilities while group members’ education indicated an insignificant effect. This means that group lenders makes the decision to lend based on these factors other than group members’ level of education. The group needs to jointly share credit liability and put pressure on defaulters so as to prevent them from defaulting, have adequate number of members to curtail the problem of free-riding in larger groups and the need for diversity in the groups in terms of gender, age and ethnicity. With these in place, access to credit will be enhanced. The researcher therefore suggested that the study be conducted on a wider perspective to determine other factors that influence group lending on micro credit accessibility among low income households.