EFFECT OF MICROFINANCE SERVICES ON FINANCIAL INCLUSION IN ARID AND SEMI-ARID LANDS IN KENYA: A CASE STUDY OF BARINGO COUNTY, KENYA
Micro-Finance Institutions (MFIs) have been known to offer various financial services that include savings mobilization, micro-credits, money transfers and financial education to its clients which are important to financial inclusion. However, there is uncertainty over the effect of microfinance services on financial inclusion in Arid and Semi-arid lands in Kenya such as Baringo County where currently 14 MFIs are operating. The objectives of this study, therefore, were to determine the effect of savings products and lending services provided by microfinance institutions on financial inclusion in Baringo County grounded on the Financial Intermediation theory. The study adopted descriptive research study method targeting 14 microfinance institutions operating in the area from which the accessible population was 476 individuals comprising 56 MFIs managers and credit officers and 420 clients of the MFIs. A total sample size of 254 respondents was used. Data was collected using pretested structured questionnaires and was analyzed using both descriptive and inferential statistics. The findings revealed that both savings products and lending services significantly affected financial inclusion in the area with lending services having a more significant effect than savings products. Cumulative savings were the most important assessment tools for loans qualification compared to guarantors and ability to pay. Low access to savings impeded savings mobilization. most of the loans were processed within one month. Majority of the microfinance institutions offered standardized products and services. All the microfinance institutions respondents indicated that the considered client’s ability to pay and a considerable percentage indicated to consider cumulative savings and guarantors when awarding loans. A significance level of 95% (α=0.05) was used in the analysis of the effect of microfinance institutions services on financial inclusion. The probability values for the variables; lending services, savings products, payment services and financial education were 0.037, 0.000, 0.016 and 0.024 respectively. The probability values of the independent variable were less than α=0.05 thus implies that the predictor variables were significant to influence financial inclusion.
Key words: Microfinance, Financial inclusion, Financial Education, Financial Intermediation, Lending, Savings.