Factors Influencing Financial Access to Housing Microfinance by Low Income Earners in Kenya

Abstract

Access to housing finance is limited in most emerging economies as residential mortgage lenders do not finance the housing needs of the low income earners, when exposed to large cash-flow and credit risks. Housing microfinance is one of the recent avenues for low income households to access loans for housing. The study sought to establish the factors influencing financial access to housing microfinance by low income earners in effect in Kenya. This study was based on an exploratory design. The target population comprised 14 MFIs in Kenya which provide housing micro loans that are registered with the Association of Microfinance Institutions of Kenya (AMFI). The study therefore used a census of all the 14 housing microfinance institutions. The study used both primary and secondary data sources. Data analysis involved reducing accumulated data to manageable levels, developing summaries, looking for patterns and applying statistical techniques. The study established that capacity/source of repayment was key in designing the housing micro loan. The study also established that the purpose of the loan (Type of product) was key in designing the housing micro loan. The study further established that security/ risk mitigation was key in designing the housing micro loan. The study also concluded that MFIs take into account the purpose of the loan, the risk mitigation, the profession of the client, the loan tenure and the economic conditions during the product design. The study recommended that MFIs that do not conduct pilot surveys to market test products should do so in order to ensure that the product design fits the needs of the customer. The study recommended that MFIs embrace new technological developments so as to ensure their serve their customers in a better faster and more efficient manner.