The effect of microfinance loans on poverty reduction: a case study of k-rep bank

Abstract

This Research is about the effect of Microfinance loans on poverty reduction in Kenya. It undertakes a review of microfinance and its impact on poverty reduction. Advocates of microfinance argue that Microfinance loan is a powerful tool to alleviate poverty. The objective was to find out the role of microfinance loans in poverty alleviation or reduction. It also aims at identifying or examining the effectiveness of microfinance and its challenges. The research design was case study which employed descriptive techniques. Quantitative procedures include the use of cross tabulation, frequency distributions and percentages. Qualitative analysis includes the identification and comparison of the responses. The simple random sampling technique was used to select respondents made up of four groups of K-Rep bank clients within the Kawangware and Kibera areas. The study revealed that microfinance loans and microfinance institutions play a crucial role in reducing poverty in the country. The study revealed that microfinance institutions despite their importance are faced with lots of challenges; key among them is loan defaults by customers and inadequate capital to sustain and cater for the growing number of clients. The number of respondents selected was 40 with a sample of 10 from each of the 4 groups within Kibera and Kawangware areas.