Micro-crediting for low income earners

Abstract

crediting is the extension of very small loans to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history, while a micro enterprise is a type of small business, often registered, having five or fewer employees and requiring seed capital of not more than Ksh 2.8M. It will identify the potential benefits for the unemployed and financially constrained man, the community and the government at large. Drawing from the existing literature and indicative empirics, it examines the conditions that would facilitate success of micro crediting for Small business in Kenya. The underlying objective is to show that micro-crediting can assist create a source employment for the jobless by giving them capital to start their small- medium enterprises. To show that micro-crediting encourages independence and self-sufficiency since now more people can create their own source oflivelihood; they don't have to rely on hand outs and aids. The project also aims to show that micro crediting can contribute to 'vision 2030.' There has been an increase in the amount of loans taken up since the introduction of micro- financing. From 2006, there has been an upward trend in borrowing. The more people take up loans to start small enterprises; this is helping create informal jobs amidst the crowding in the formal job sector. A greater percentage of the population now does not have to rely on hand outs or aids as they can now provide at least their basic needs. With more people having their businesses, the nation is headed closer to achieve 'vision 2030', as the poverty levels are decreasing while industrialization being on the rise. The Commercial Banks lending rates, are relatively higher than the micro-credit rates, it is therefore more economical to get a micro-loan from a micro financing institution. These conclusions were realized after using the amortization schedule for calculations. The population needs to be educated concerning the micro-crediting program, and shown different business opportunities one can venture into. A follow up person can be appointed to follow up on whether the loan was put into good use, to avoid extravagancy, the borrower could be required to submit weekly or monthly reports to the lender instead. More studies should be done concerning micro-crediting to show how it can be used to improve the lives of Kenyas. A study on micro crediting where, different loan amounts can be taken up by the different members of the group is paramount.