EFFECT OF MICROFINANCE SERVICES ON WOMEN FINANCIAL EMPOWERMENT IN KISII CENTRAL DISTRICT, KENYA .A CASE OF KWFT IN

KISII CENTRAL DISTRICT

PATRICK MIGIRO

AN APPLIED RESEARCH PROPOSAL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A MASTERS DEGREE IN BUSINESS ADMINISTRATION IN THE DEPARTMENT OF BUSINESS

ADMINISTRATION OF AFRICA NAZARENE UNIVERSITY

October 2014

DECLARATION

I declare that this research proposal is my original work and that it has not been presented in any other university for academic credit.

Name of Student……………………………………………………………………………………

Signature: ………………………….…………. Date …………………………...............................

SUPERVISOR’S DECLARATION

This applied research proposal is submitted for examination with my approval as the university supervisor.

Name of the Supervisor: …………………………………………………………………………

Signature: ………………………………………Date……………….…………………………..

DEDICATION

I dedicate this research report to my late parents, my dear wife Jayne and our beloved children,

Gravin, Dr. Cynthia, Tim and Keith for the support they accorded me in the course of my study.

Table of contents

ACKNOWLEDGEMENT

My sincere gratitude to all whose various contributions made this work possible; my supervisor

Prof. Jared On’gon’ga for his valuable and insights through all the stages of the study. The

director, Nazarene University-Kisii campus Mr. Nyariki, lecturers and support staff of Nazarene-

Kisii campus.

Thanks to my entire family for their moral and financial support and finally my friends who

encouraged me. May God bless you all.

ABSTRACT

Women today form the majority of the total world population. Out of the 7 billion global

inhabitants about 2 billion form women population. They are poor and poverty surrounds their

economic lives. Efforts have been made to reduce this level of poverty and support women to

change their livelihoods. For instance, experts have advised that if grants and loans are extended

to women they will assists to build up their own wealth and empower families which will

eventually generate employment opportunities for themselves. Nevertheless, when such efforts

are, one query that needs to answered is the level to which grants and soft loans may be given to

women to help them take gain from micro entrepreneurship opportunities that surrounds them. In

addition such efforts will at the end assist women limit lack of basic needs amongst them.

Poverty amongst women is still widespread and that is why such credit is important to change

their livelihoods. Of the 2 billion women today in the world, half of them live on not more than a

dollar a day.

Such economic conditions are mainly evident in third world nations like Kenya. Responding to

all these, this study will seek to investigate the effects of microfinance services on the financial

empowerment of women in Kisii Central district in Kenya. In particular, the researcher will seek

to establish the effect of savings mobilization by Microfinance institutions on the women

financial empowerment, establish the effect of Micro finance loans on investments by women

and ascertain the effect of Training on micro enterprises on financial management skills of

women in Kisii County.

The researcher will target the 3000 microfinance beneficiary women in women groups and

individual women who had obtained financing from Kenya Women finance trust. The study will

follow a descriptive survey. Random and Purposive sampling approaches will be adopted to pick

respondents from two clusters. Primary data will be obtained using a self-administered pretested

structured and semi structured questionnaire. Secondary data will be obtained from published

books, journal articles and reports. Analysis will be done using descriptive statistics involving

measures of central tendency and dispersion.

The study will show effect of microfinance services on the financial empowerment of women in

the Kisii Central District, Kisii County. The study will make recommendations upon conclusion

of the research to KWFT on how to better meet its objectives.

Definition of terms

Loans-working capital

Savings mobilization-pooling of resources

Training- provision of adequate business and management skills on micro enterprises

1.0 INTRODUCTION

Given the status of women particularly in third world nations, financial

empowerment of women has become a development agenda at both global and country

levels in recent decades, particularly since the Beijing Women‘s conference in 1995

(Anderson & Eswaran, 2005). History informs us that women in many third world

nations are underprivileged when it comes to social and economic status. When they are

compared to men women are disadvantaged on many social, economic, independence, they

have no control of the available resources not excluding credit facilities, entitlement to own

land and inheritance, lack of opportunities to get educated and support services as well as

minimal participation in the decision-making process. Supporting equal

opportunities and equal access and control over productive/economic assets,

social resources and essential services for all is argued to be critical to poverty

reduction, gender equality and overall women empowerment (DFID, 2000)

1.1 Micro finance services

Micro finance Services refer mainly to small loans; savings mobilization and training in

micro enterprise investment services extended to poor people to enable them undertake self

employment projects that generate income. Micro finance came into being from the

appreciation that micro entrepreneurs and some poorer clients can be ‘bankable’, that is, they

can repay both the principal and interest, on time and also make savings, provided financial

services are tailored to suit their needs (Von, 1991). Micro finance is perceived as the

provision of financial and non financial services by micro finance institutions (MFIs) to low

income groups without tangible collateral but whose activities are linked to income

generating ventures (Lidgerwood, 1999 and Business and Management Review Vol. 2(3) pp.

22–35 May, 2012ISSN: 2047 -0398. Christen and Rosenberg, 2000). These financial services

include savings, credit, payment facilities, remittances and insurance. The non-financial

services mainly entail training in micro enterprise investment and business skills. There is

also a belief that micro finance encompasses micro credit, micro savings and micro insurance

(Roth, 2002). Micro finance is not a new development. Its origin can be traced back to 1976,

when Muhammad Yunus set up the Grameen Bank, as experiment, on the outskirts of

Chittagong University campus in the village of Jobra, Bangladesh. The aim was to provide

collateral free loans to poor people, especially in rural areas, at full-cost interest rates that are

repayable in frequent installments. Borrowers were organized into groups and peer pressure

among them reduced the risk of default (Khan and Rahaman, 2007). In many cases, basic

business skill training should accompany the provision of micro loans to improve the

capacity of the poor to use funds (Webster and Fidler, 1996). Micro financing should

addresses capital investment decisions, general business management and risk management.

In the world over, provision of micro finance services to the women has been considered an

innovative and sustainable approach to women financial and micro enterprise activities

empowerment leading to generation of income so as to improve their livelihoods and

contribute to economic growth. Debates on extending the reach of microfinance to the very

poorest people increasingly focus on savings facilities. For many women, savings facilities

are essential in increasing the amount of income under their control and in building assets. In

remote areas, mobilization and intermediation of member savings may be crucial first steps

before accessing external loan funds. A number of studies have observed that savings-led

groups perform better than credit-led ones (Allen 2005; Murray and Rosenberg 2006; Ritchie

2007). Access to micro-finance has the potential to assist the poor in earning income from

microenterprises, smooth their income and consumption (Zeller, 1999), help households

diversify their income sources. (Anand et al. 2005). According to Mosley (2000)

microfinance makes a considerable contribution to the reduction of poverty. It helps increase

income earning and asset building opportunities which make households less reliant on a

single asset type and consequently deal with disasters. (Anand et.al. 2005). According to

Hassan (2002), many Grameen Bank borrowers were actually building larger houses.

Panganiban(1998) advances that the income of borrowers has risen and their assets base has

widened. Investments made by loans appear to have been extremely productive and to have

contributed significant improvements in household output, income and consumption (Ghai,

1984). In Tegucigalpa and Cholteca in Honduras in 2003, effect assessment studies revealed

that 60% and 50% of the recipients had their sales and incomes increase respectively one

year after receipt of credit for working capital Agricultural Finance Cooperation Limited in

2008 in India, assessed development effect of microfinance programmes. Clients reported

increase in income from 76% of activities. There is therefore reason to believe microfinance

services in its entirety should report effect on savings, income and investments alongside non

financial effect such as change in skills through training. This study will be specific in

investigating these aspects.

1.1.1Microfinance Services in the World

The current global women population is very large. Of the world’s more than 3 billion people

estimated to be under the age of 25, approximately 1.3 billion are women, as estimated by the

UN (Women Save, 2010). Yet women the world over are aware of the inequities of the global

system, which leaves them vulnerable in many ways.. Moreover in line with most cultures in

developing countries, the employed have to look after the unemployed extended family

members, thereby reducing their ability to save and opportunities for wealth creation that is

needed to spur economic growth. To this end, microfinance, the provision of a wide range of

financial services, has proved immensely valuable to poor people, especially the women and

young people on a sustainable basis. Access to financial services has allowed many families

throughout the developing world to make significant progress in their own efforts to escape

poverty (Wright, 2005).The provision of credit has increasingly been regarded as an important

tool for raising the incomes of women, mainly by mobilizing resources to more productive uses.

As development takes place, one question that arises is the extent to which credit can be offered

to the women to facilitate their taking advantage of the developing entrepreneurial activities. The

generation of self-employment in non-farm activities for example, requires investment in

working capital. However, at low levels of income, the accumulation of such capital may be

difficult. Under such circumstances, loans, by increasing family income, can help the women to

accumulate their own capital and invest in employment-generating activities (Hossain, 1988).

1.2 Microfinance Services in Africa

Many diverse institutional models of micro financing are functioning in Africa, but most clients

are served by credit unions and co-operatives –often based (particularly in East Africa) on the

agricultural commodities their Business and Management Review Vol. 2(3) pp. 22–35 May,

2012ISSN: 2047 -0398 members sell (e.g. coffee, tea, cotton etc.) or the nature of their

employment (Wright, 2005). In West and Central Africa however, savings and credit

cooperatives are generally more community-based. In contrast to Asia, the lack of population

density means that rural and agricultural finance is particularly challenging, and thus many MFIs

are urban-based and focused. Perhaps as a result the July 2003 Micro Banking Bulletin identified

only 8 sustainable institutions and estimated that only around 25 million clients are being served

throughout the continent. However, these numbers may under-estimate or ignore the large

numbers being served by cooperatives and postal banks. Nonetheless both international and

domestic banks are starting to take an interest in the potential of the low-income market in

Africa. The last twenty years have seen significant improvements in micro financing through

advances in understanding and providing financial services to better advance development and

eradicate poverty. This includes providing the financial means to save, access credit, and start

small businesses, with the potential to enhance community development, as well as local and

national policy making. When properly harnessed and supported, microfinance can scale-up

beyond the micro-level as a sustainable part of the process of financial empowerment by which

the poor can lift themselves from poverty.

The micro financing revolution effectively demonstrates that when poor households have access

to financial services, not only do they save, but, they also have high repayment rates when they

borrow. It is noted that, microfinance institutions have made financial services available to

millions of poor households worldwide but this still represents a tiny fraction of the population

in developing countries where the majority lack access to formal financial services.

1.1.3 Microfinance Services in Kenya

In Kenya, the women are about 13 million which is equivalent to 56% of the population

(Ministry of Women and Sports, 2008). Of the 13 million women, less than 50% are in gainful

economic activities in the formal, informal and public sectors of the economy while majority are

unemployed, (Simeyo et al.2011). They comprise a big percentage of the unemployed. This trend

is worrying and calls for intervention measures. Micro finance lending and associated services

are one such intervention. However, lack of collateral and high interest rates is an impediment to

access to loans from Micro finance institutions (MFIs) by the women (Mushimiyimana, 2008).

The women who secure funds from such institutions spend the bulk of their returns on

investment in paying the cost of capital, thus leaving them with none or little savings for

reinvestment. As a result, majority of the women in the women investments fail to grow into

Small and eventually Medium enterprises. Therefore, to bring the women on board, the Kenyan

government with the support of development partners in 2006 established women enterprise

development fund that is channeled to Micro finance Institutions and other financial

intermediaries for onward lending to the women without collateral. Such a fund attracts a greatly

reduced cost of capital which stands at 8% per annum as a strategy to make the fund affordable

to the women who in many cases do not have collateral and therefore ideal for start-ups.

Given that the vision of micro finance is to promote the growth of micro enterprises, MFIs and

other financial intermediaries have experienced rapid growth to support the women financial

requirements. Institutions such as the Kenya Rural Enterprise Program (K-REP), a non-

governmental organization that was started in 1984 under the funding of the USAID are some

microfinance institutions. Today, K-REP is fully licensed as a bank and offers a wide range of

banking services in addition to its micro finance specialty (Dondo, 1991). K-REP operates two

major loan programs for micro and small entrepreneurs, Jihudi and Chikola. Each Jihudi group

consists of three to eight individuals. The Chikola loan program works through existing rotating

savings and credit self help groups (ROSCAS) that comprise of individual micro entrepreneurs

(Kioko, 1995). A number of MFIs and financial intermediaries including KREP, Equity bank,

Kenya Women Finance Trust (KWFT), Faulu etc have since then come up to provide micro

finance services to the low income groups for purposes of starting or developing income

generating activities.

In view of the increasing microfinance services in the Country targeting the poor with

anticipation of an increase in positive outcomes, particularly in the counties, as is evidenced by

the efforts above; this research seeks to establish the effect of micro finance lending and related

services on financial empowerment of women in Kisii Central District, Kisii county.

1.2 Statement of the Research Problem

The current global women population is very large. In Kenya, the Ministry of Women and Sports

report (2008) indicates that the women are about 13 million which is equivalent to 37% of the

population. Of the 13 million women, less than 50% are in gainful economic activities., informal

and public sectors of the economy while majority are unemployed, (Simeyo et al.2011) and live

on less than two dollars a day, as estimated by the United Nations.. Attempts to alleviate the

women from this poverty level have been carried out in as many places in Kenya. The provision

of credit, for example, has increasingly been regarded as an important tool for raising the

incomes of these women, mainly by mobilizing resources to more productive uses. Unfortunately

poverty has continued to prevail among them even with such loans.

There is therefore the need to investigate the effect of micro finance services on the financial

empowerment of women, particularly in Kisii central District. There are insufficient studies on

this area with no studies carried out to determine how Kenya Women Finance Trust has

impacted on women in Kisii central. It is for this reason that this study seeks to investigate the

effect of micro-finance services on the financial empowerment of women in Kisii central

District. Specifically, the research seeks to determine the effect of microfinance services on the

social economic development of women in Kisii central district as advanced by KWFT.

1.4 Objectives of the Study

The study will be guided by the following objectives:

1. To assess the effect of micro-credit/loans on women financial empowerment in Kisii

central District.

2. To determine the effect of savings mobilization by MFIs on Women Financial

empowerment in Kisii central District

3. Identify the effect of training on Micro enterprise investment on Women financial

empowerment in Kisii central District.

1.5 Research Questions

The following are the research questions:

1. What is the effect of Micro credit/loans on women financial empowerment?

2. What is the effect of Savings mobilization by MFIs on women‘s financial empowerment?

3. What is the effect of training on Micro enterprise investment on women financial

empowerment?

1.6 Significance of the Study

On the premises that for self-esteem and dignified life; women need to increase

their access to and control over the necessary resources, it becomes important to explore the

extent to which the prevailing credit schemes in Kenya, have been able to facilitate the

empowerment process of women given that this ability is basically limited to this

group. The research aims at providing additional empirical findings on effectiveness

of grass root financial institutions in bringing  positive change to the women; given that

few studies on the subject matter have been conducted in Africa compared to the Asian

countries. Moreover, given that micro-finance industry in Kenya is relatively young the study

will potentially provide insights to the microcredit service providers i n Ke nya a nd o the r

deve l opmen t ac to r s on the p rog re s s o f w omen e mpow erme n t i n i t i a t i ve

through microcredit in Kenya. Furthermore, only a few studies in Kenya have

investigated if microfinance services are truly a way forward for empowering

women or not. This reveals a research gap that calls for research to be done to

understand the position of women who are members of MFIs in Kisii central

district. Therefore, the study will investigate the relationship  between women

entrepreneurs’ participation in microfinance services and their empowerment  by using the

combination of large quantitative and qualitative data from selected women groups in Kisii

central District who have benefited from KWFT.

1.7 Scope of the StudyThe study will cover Kenya women finance trust establishments operating within

Kisii County. The branches to be covered will be randomly sampled among the

branches in Kisii County .The information to be used to derive the findings will

span a period of 5 years, from 2008 to 2013.This is the period that has seen the hype

of MFIs and women empowerment initiatives that have been brought to kisii county

1.8 Limitation of the Study

The problems to be encountered in the research will be varied in nature. However, lack of time,

financial constraints, and available data and literature on the subjects among MFIs in Kenya are

some of the constraints likely to be experienced in the study . Be as it may, data will be

collected and analyzed using both qualitative and quantitative methods.

1.9 Theoretical framework .

This study will be guided by the microfinance theory of change which provides the

thinking process before and after taking a loan. A poor person goes to a microfinance

provider and takes a loan (or saves the same amount) to start or expand a microenterprise which

yields enough net revenue to repay the loan with major interest and still have sufficient profit to

increase personal or household income enough to raise the person's standard of living. This

individual takes a loan from (or save with) a microfinance institution (or similar entity), Invests

the money in a viable business and then Manages the business to yield major return on the

investment. This theory doesn’t always apply to all poor people as they can choose not to

participate in the process even when they can, this then leaves a gap that has to be studied

conclusively to unravel the mystery that is improved livelihoods resulting from access to loans

from KWFT.

Conceptual Framework of MFIs

I.V D.V

Source: Researcher 2014

S c h o l a r s a n d p r a c t i t i o n e r s h a v e p r o p o s e d d i f f e r e n t f r a m e w o r k s f o r

m e a s u r i n g w o m e n empowerment. Kabeer (2001) proposed a framework for measuring

women empowerment. As it has been noted earlier, Kabeer’s (2001) concept of empowerment

refers to the expansion in people’s ability to make strategic life choices in a context where this

ability was previous denied. This concept is about getting out of disempowered position where

one cannot make any choices and to be in an empowered position where one can be able to make

1. Micro Loans

2. Savings Mobilization.

3. Training

WOMEN FINANCIAL EMPOWERMENT.

choices. In order to change in the ability to exercise choices, for Kabeer, empowerment can be

thought of in terms of resources, agency and ac h i evem en t s . Res ou rces ca n be

ma t e r i a l , s oc i a l o r human ; r e s ou rces fo rm the conditions under which choices

are made. Agency is the heart of the process by which choices are made; is the ability

to define one’s goals and act upon them. Resources and agency together constitute capabilities,

the potential that people have for living the lives they want, of achieving valued ways of ‘being

and doing’ (Ibid).Malhotra and Schuler (2005) provide a framework of dimensions and

indicators of women’s empowerment in household, community and broader arena.

According to them, Most of the indicators of empowerment refer to women’s ability to

make strategic decisions that affect their well-being and their families. The author posits the

dimensions of empowerment in framework as economic, social and cultural, legal,

political and psychological. Economic empowerment i nc l udes w omen’ s con t ro l ,

a cc ess t o c r ed i t , con t r ibu t i on t o f am i ly suppo r t a nd inc r ea s ed househo l d

owne r sh i p o f p rope r t i e s and a s se t s . Soc i a l and cu l t u r a l e mpow ermen t

i nc l udes f r ee dom o f move men t , l a ck o f d i s c r im ina t ion a ga in s t daugh te r s ,

comm i tm en t t o educa t ing daughters, participation in domestic decision making,

control over sexual relations, ability to make childbearing decisions, use

contraception, control over spouse selection and marriage timing and freedom from

violence. Legal empowerment includes the knowledge of legal right s and mechanisms

and familial support for exercising rights. Political empowerment includes the knowledge of

political system and means of access to it, familial support political engagement and

ability to exercise fight to vote. Psychological empowerment includes women increased self-

esteem, self-efficacy and psychological well-being (Ibid).Drawing from Malhotra and

Schuler, (2005) Kabeer, (2001) and Chen (1997) the most used indicators of women

empowerment in different studies are control over savings and income ,ownership of

assets, decision-making, self-efficacy, and self-esteem. This study uses these

indicators of women empowerment as the outcome of participating in MFIs to

understand the positions of women who are members of KWFT in Kenya. The above

scenario can be depicted by the following framework.

CHAPTER 2: LITERATURE REVIEW

2.0 Introduction

Microcredit broadly speaking is the provision of loans to very small businesses it is an

increasingly common weapon in the fight to reduce poverty and promote economic growth.

Traditional micro lenders target women operating small-scale businesses and use group lending

mechanisms. But as micro lending has expanded and evolved into its “second generation,” it

often ends up looking more like traditional retail or small business lending for-profit lenders,

extending individual liability credit, in increasingly urban and competitive settings. For example,

recent estimates suggest that about one-half of microfinance institutions are individual liability

lenders, and about one-quarter are for-profits or cooperatives (Cull et al. 2007; 2009).

The impact of microcredit is a subject of much controversy. Proponents state that it reduces

poverty through higher employment and higher incomes. This is expected to lead to improved

nutrition and improved education of the borrowers' children. The available evidence indicates

that, compared to the number of microloans advanced, microcredit has facilitated the creation

and the growth of a tiny number of businesses. Going further, the extremely high failure rate of

most informal microenterprises often leaves the average individual micro-entrepreneur worse off

into the longer run, when household assets, land and housing have to be sold off (often under

duress) to repay an outstanding microloan. In addition, new poverty-push micro-entrepreneurs

also take business away from already struggling microenterprises, which reduces the turnover in

existing businesses, and so also net income. Taking both downside effects into account, this

generally means that there is no net positive impact arising from the application of microcredit

This is especially the case in the poorest locations where there has always been very little

demand from local people for the simple goods and services provided by the typical informal

microenterprise that microcredit helps create. Microcredit has been directed at women because it

was believed that, compared to men, they are better clients of microfinance institutions and that

women's access to microcredit has more desirable development outcomes, since women tend to

spend more money on basic needs compared to men. Microcredit has also been promoted as a

tool to empower women. Early studies tended to confirm this positive picture. For example, a

1996 study in Bangladesh claims that the "success" of reaching women with microcredit was

"highly impressive", but also notes that loans are often given over to male relatives or husbands.

Only in a minority of cases there was an increase in domestic violence for women who did not

get the loan or had to wait a long time to get the loan. The study also showed that women are

more likely to retain control over their loans in traditional women’s work like livestock rearing

that are considered “women’s work”. The President of Grameen Foundation USA suggested in

2005, based on a review of various studies, that "there is strong evidence that female clients are

empowered". It also found that "even in cases when women take but do not use the loan

themselves, they and their families benefit more than if the loan had gone directly to their

husbands".

2.1 Th e Mic ro -cre d i t and w omen f in an c ia l emp owe rmen t

Micro loan borrowers typically lack the credit history or collateralizable. Wealth needed to

borrow from traditional institutional sources such as commercial banks. Casual observation

suggests that many micro-entrepreneurs face binding credit constraints. Credit bureau coverage

of micro-entrepreneurs in the Kenya is quite thin, so building a credit history is difficult for poor

business owners and consumers. Informal credit markets and serial borrowing from

moneylenders charging 20% per month or more is common.

Access to information has a significant influence on micro credit accessibility. There is

increasing awareness among policy makers of the important contribution that women

entrepreneurs can make to employment and the economic growth of their countries. According to

the National Foundation for Women Business Owners (NFWBO), women entrepreneurs

represent one-quarter to one-third of the total business population (OECD, 2000). In developed

countries such as the United States, women own 38 per cent of small enterprises, which employ

52 per cent of the private sector workforce and generate 51 per cent of private sector output

(Milken Institute,2000). In some countries such as Brazil, the Republic of Ireland, Spain and the

United States, women are creating new enterprises at a faster rate than men (OECD, 2001).

Nevertheless, several studies have shown that women in developing and developed countries

encounter serious difficulties when accessing finance especially for start-ups, but also for the

expansion of established enterprises.

Women entrepreneurs who deal with financial institutions are often confronted with problems

associated with gender bias. “Gender bias refers to lender behaviour that fosters inappropriate

consideration of the applicant’s gender in the credit underwriting and approval process. Gender-

biased behaviour can severely hamper women seeking small business credit and impede the

formation of profitable customer relationships, even before customers’ needs or loan requests are

assessed” (Woos, 1994). When there is gender bias at high levels of management, loan requests

will require additional and unnecessary documentation, additional guarantees or co-signers or

other conditions different from male applications. Some examples of the difficulties that women

experience when working with financial institutions are: a general lack of interest in women

entrepreneurs’ projects; questions from loan officers regarding personal and family situations

such as the spouse’s view of the business, marriage plans, plans for childbearing or other

remarks unrelated to the financial aspects of the application; delays in the loan application

process; limited information about alternative financial products and lack of explanations when

financing requests are denied.

Due to social-cultural constraints, women often have a more difficult time accessing finance than

men, forcing them to depend on their savings or that of their relatives and on informal sources of

finance. The particular difficulties encountered by women entrepreneurs may be explained by the

following:

- Small size of the enterprises: women entrepreneurs own small enterprises and are on average

more likely to have micro-enterprises, located in the service and retail sectors. Thus, women

require small loan amounts that are not considered profitable by banks.

- Lack of collateral: women in general have less personal capital/fewer assets to start a business

or to be used as collateral. This may be due to social and legal disadvantages, such as lower wage

incomes or limitations in the ownership of property. “In many countries, women cannot even

hold land titles, thus they are effectively barred from formal sector credit.

- Another type of constraint is the requirement for the male spouse’s co-signature; and it is also

often a requirement that women must obtain a guarantee declaration from the husband or father”

(International Labour Organization, ILO, 1999). Moreover, since women’s enterprises are

usually in the service sector and do not have tangible assets for collateral, such firms rely mainly

on intangibles assets (which are difficult and costly to evaluate for financing institutions).

-Lack of skills: women entrepreneurs have lower education levels and less professional

experience than male entrepreneurs. They lack management skills and competencies in finance

and accounting, which are key to improving access to finance. Furthermore, due to social and

educational factors, they fear complicated bank procedures and lack confidence to deal with

lending institutions and effectively convey their business proposals.

- Lack of information: women entrepreneurs often lack information on the existence of credit

facilities, financial instruments, networks and the borrowing conditions of financial institutions.

- Lack of track records: women entrepreneurs have difficulty showing past business performance

information or continuous business activity since they are often forced to interrupt their careers

to take care of their families.

- Family obligations: women entrepreneurs normally combine their business activities with their

family obligations, which may be viewed with distrust by financial institutions.

2.2 Re la t ion s h ip be twe en loan s ad van ced an d f in anc ia l empowerment of

women

Microfinance has emerged globally as a leading and effective strategy for poverty reduction with

the potential for far-reaching impact in transforming the lives of poor people. According to most

observers, microfinance can indeed facilitate the achievement of the Millennium Development

Goals (MDGs) as well as national policies that target poverty reduction, women’s empowerment,

vulnerable groups, and improving standards of living. As noted by former UN Secretary General,

Kofi Annan, during the launch of the International Year of Micro Credit (2005), “sustainable

access to microfinance helps alleviate poverty by generating income, creating jobs, allowing

children to go to school, enabling families to obtain health care, and empowering people to make

the choices that best serve their needs " (United Nations, 2004; Asiama, 2007).

Although microfinance is not a panacea for poverty reduction and its related development

challenges, when properly harnessed it can make sustainable contributions through financial

investment to the empowerment of people, which in turn promotes confidence, self-esteem, and

civic and economic participation, particularly for women.

Normally, providing the poor women financial services increases their income and that is why

microfinance productivity and reducing poverty services have been developed to fill these gaps,

with increasing assistance from the various financial institutions and other donors. Microfinance

services is emerging as a powerful tool to reduce poverty and improve access to financial

services for the poor women in world wide in general and in Rwanda Economic power means

access especially to income, assets, food, markets and decision-making power in the economic

activities.

Social power means access to certain bases of individual production such as financial resources,

information, knowledge, skills and Psychological power means the participation in social

organizations. Individuals sense of potency, which is demonstrated in self-confident According

of the Lowlands (1995) describe it behavior and self esteem. as “a process whereby women

become able to organize themselves to increase their own self-reliance, to assert their

independent right to make choices and to control resources which will assist in challenging and

eliminating their own subordination.

2.3 MFI S sav i n gs mob i l i za t i on an d i t s e f f ec t on w omen ’s emp owe rmen t

Although women’s access to financial services has increased substantially in the past 10 years,

their ability to benefit from this access is often still limited by the disadvantages they experience

because of their gender. Some MFIs are providing a decreasing percentage of loans to women,

even as these institutions grow and offer new loan products. Others have found that on average

women’s loan sizes are smaller than those of men, even when they are in the same credit

program, the same community, and the same lending group. Some differences in loan sizes may

be a result of women’s greater poverty or the limited capacity of women’s businesses to absorb

capital. But they can also indicate broader social discrimination against women which limits the

opportunities open to them, raising the question of whether micro-enterprise

development programs should do more to address these issues. And looking at the leadership of

many MFIs, we see very few women. Their contributions—whether setting the vision on a board

of directors, designing products and services, or implementing programs—are missing. Thus, as

the industry becomes more sophisticated in developing targeted products and services, it makes

sense to look at both targeting women and empowering women. Microfinance programs have the

potential to transform power relations and empower the poor—both men and women. In well-run

microfinance programs, there is a relationship of respect between the provider and the client that

is inherently empowering. This is true regardless of the methodology or approach (whether the

institution takes a minimalist approach of delivering financial services only or a more holistic or

integrated approach). As a consequence, microfinance has become a central component of many

donor agencies’ and national governments’ gender, poverty alleviation, and community.

International aid donors, governments, scholars, and other development experts have paid much

attention to microfinance as a strategy capable of reaching women and involving them in the

development process. The microfinance industry has made great strides toward identifying

barriers to women’s access to financial services and developing ways to overcome those barriers.

A 2001 survey by the Special Unit on Microfinance of the United Nations Capital Development

Fund (SUM/UNCDF) of microfinance institutions revealed that approximately 60 percent of

these institutions’ clients were women. Six of the 29 focused entirely on women. Among the

remaining 23 mixed-sex programs, 52 percent of clients were women. The study also showed,

however, that those programs offering only individual loans or relatively high minimum loan

amounts tended to have lower percentages of women clients. These findings affirm the

importance of designing appropriate products for women. According to USAID’s

annual Microenterprise Results Report for 2000, approximately 70 percent of USAID-supported

MFIs’ clients were women. Considerable variation among the regions was seen, however, with

percentages of women clients ranging from 27 percent in the Near East to 87 percent in Asia. In

Eastern Europe, where USAID has traditionally supported individual-lending programs, the

percentage of women clients dropped as low as 48 percent in 1999 before rising to 54 percent in

2000, when USAID began to support more group-lending programs offering smaller loans.

 Although the UNCDF study found that larger programs tended to have lower percentages of

women clients, data collected by the Microcredit Summit Campaign found no statistically

significant correlation between the numbers of very poor clients served by each institution and

the percentage of those clients who were women. Microfinance institutions around the world

have been quite creative in developing products and services that avoid barriers that have

traditionally kept women from accessing formal financial services such as collateral

requirements, male or salaried guarantor requirements, documentation requirements, cultural

barriers, limited mobility, and literacy. Nevertheless, in a number of countries and areas few or

no institutions offer financial services under terms and conditions that are favorable to women.

Together, these findings confirm that the type of products offered, their conditions of access, and

the distribution of an institution’s portfolio among different products and services affect.

According to the Daily news (8/28/2009) Women entrepreneurs throughout the world

contribute to economic growth and the sustainable livelihood of their families and communities.

Microfinance helps empower women from poor households to make this contribution.

Microfinance — the provision of financial services to the poor in a sustainable manner —

utilizes credit, savings and other products such as micro insurance to help families take

advantage of income-generating activities and better cope with risk.

Women particularly benefit from microfinance and many microfinance institutions, or MFIs,

target female clients. Microfinance services lead to women’s empowerment by positively

influencing women’s decision-making power and enhancing their overall socio-economic status.

By the end of 2006, microfinance services had reached over 79 million of the poorest women in

the world. As such, microfinance has the potential to make a significant contribution to gender

equality and promote sustainable livelihoods and better working conditions for women. Goetz

and Gupta (1996) point to another less developed link in the literature on credit and

empowerment. They argue that the ability of women in bringing credit a valuable and productive

resource to the household may enhance their position within the family, resulting in economic

empowerment. However, they completely ignore this lead in their empirical approach

of measuring and quantifying empowerment. Using an index reflecting the degree of

control the women have on the loans that they take, they conclude that most women

have minimal control over their loans.

2.4 Training on Micro enterprises investments .

In the field, IFAD-commissioned experts have helped KWFT become more efficient. Previously,

KWFT field officers met with client groups every week. Now, groups are given an initial

intensive training period of 3-6 months. After that, they meet with KWFT field officers only

once a month. This has allowed field officers to greatly expand the number of clients and

outstanding loans they can handle. Field officers can reach large sections of rural Kenya by using

motorbikes to cover a radius of 25 kilometers from each branch. Higher staff efficiency has made

it possible to develop financially sustainable operations, even in rural areas.

KWFT has also improved its relationship with clients, intensifying its client training efforts and

handing over more power to groups to manage their own affairs. Group leaders become, in

effect, KWFT field managers, taking active care of the group’s loan application and repayments.

KWFT’s own field staff takes annual courses on customer care. As a result, relations between

clients and staff tend to be very good. The Trust is committed to the on-going training of

personnel and improvements in the management information system. To a large extent, the

remuneration and training policies will determine the organization's ability to sustain a program

of financial services delivery. Retaining qualified staff entails matching the remuneration

policies of competitors. KWFT has found that setting targets and strategies on a yearly basis

(assisted by Women's World Banking) has added value to the management and evaluation of the

credit program. However, there is no "off-the shelf" system for monitoring the loan portfolio.

Moreover, trying to develop one is expensive and requires considerable expertise.

The KWFT is an affiliate of Women's World Banking. Its programmes can be split into two

basic types: training of women and credit for women. Although credit has more exposure, the

training is considered the core program me for the Trust. All potential credit recipients must take

the training course as a prerequisite to receiving a loan. However, training is also given to

women who will not be receiving a loan. A one-week course is provided to all applicants, with a

small fee charged to cover the costs of tea and supplies. Training is in small groups, whenever

possible, for women of similar educational background and from the same area. The topics

covered are managing a business; setting business objectives; salesmanship; sales promotion and

display/marketing; basic bookkeeping; stock control; banking/credit; personnel management;

planning; legal awareness; leadership skills and quality control.

The major constraint in running the courses has been the limited education of the participants.

KWFT is developing a training approach directly attuned to the needs of the illiterate and semi-

literate who form the major part of the potential clientele in the rural areas. The courses are

geared to overcome this problem as much as possible through using a combination of lectures,

drama, role play and discussions. To date, over 600 women have participated in the training

course, and 75% of these have taken loans. The women's own evaluation of the courses is that

they are extremely useful but too short. Source: Fong and Perrett, 1991.

2.5 Research Gap

Baumback [1988] states that, a major constraint on women financial empowerment and their

business ventures is their inability to obtain adequate financing, either in absolute sense or

because of the cost in terms of interest rates is often prohibitive .He further argues that the high

cost of small business borrowing has put considerable pressure on the overall small business

marginal profits.

He points out that most Women entrepreneurs rely primarily on or exclusively on own savings

and reinvested marginal profits which has a big impact of the women financial empowerment.

The researcher therefore seeks to determine the effect of the services provided by MFIs to these

women if they have had any impact on their financial empowerment

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

The aim of this chapter is to present the methodology to be used in the study. It

includes the r e s ea r ch de s i gn , t he t a rge t popu l a t i on , sa mp le s i ze and

sa mp l i ng des ign , da t a s ou rce and collection procedures and data analysis

techniques that will be utilized. The usefulness of the statistical analysis depends on

the adequacy and correctness of the information obtained. It will be noted that once

the information and the data are flawed, perhaps through bias or ambiguities other

or types of errors, the fanciest and the most sophisticated tools may not be adequate

to compensate for deficiencies. The sources of the information and the data with the

method of collection must be correct, entitled to acceptance and of established credibility.

  3.2 Research design

The researcher will use a descriptive survey research design. According to Singh

(2012), survey research is used to answer questions that have been raised, to solve

problems that have been posed or observed, to assess needs and set goals, to determine

whether or not specific objectives have been met, to establish baselines against which future

comparisons can be made, to analyze trends across time, and generally, to describe what exists,

in what amount, and in what context. Ary , J acobs , & Raz av ieh , ( 2009 ) i den t i f i ed

t h r ee d i s t i ngu i sh i ng cha rac t e r i s t i c s o f su rve y research. First, survey research will

be used to quantitatively describe specific aspects of a given population. These aspects often

involve examining the relationships among variables. Second, the data required for survey

research are collected from people and are, therefore, subjective. Finally, survey

research uses a selected portion of the population from which the findings can later

be generalized back to the population. Therefore, the option of survey research will be to offer  a

rich field and a large understanding through a combination of quantitative and

qualitative methods. Descriptive study will be used because it describes the existing conditions

and attitudes through observation and interpretation. According to Ary et al., (2009),

the suitability of descriptive r e s e a r c h d e s i g n f o r t h i s s t u d y r e s t s o n t h e

f a c t t h a t h u m a n b e i n g s l i v e b y i n t e r p r e t i n g  phenomenon around them. This

study will embrace the use of questionnaires, interviews and observations so as to address

the factors surrounding MFIs and women empowerment in Kenya.

3.3 Research site and rationale

This proposal will be carried out at selected branches of KWFT. This proposal will have

three components: research, research capacity development, and policy support. The aims of this

proposal will be to: Elaborate, derive and test a conceptual model on the relationship between

entrepreneurial leadership, social capital, resource assembly and performance of small and

medium-sized enterprises in Kisii county, Disseminate the research findings to both researchers

and practitioners using different channels such as journal papers, conferences, policy briefs,

popular media and policy forums, Train young researchers, including graduate students in the

participating universities, and develop a teaching/training material for entrepreneurship scholars

and students and to Provide scientific and other support towards policy development, research

capacity development and entrepreneurial capacity building for SMEs, especially on leadership,

management, resource assembly and performance enhancement.

3.4 Target Population

The research will target KWFT women members, in branches within Kisii County. These will be

assumed to be a good representative of the scenario of MFIs throughout the country.

The study will focus on women members who have been in the MFIS for a period of

more than four years. This is presumed as the minimum duration in which the impact of

would have taken place.

 

3.5 Sampling procedure

The sampling procedure will utilize convenience sampling. The reason for choosing convenient

sampling would be that the technique is fast, inexpensive, and easy. In addition, the subjects are

also readily available. According to Gravetter & Forzano (2012), convenient sampling is a

non- probability sampling technique where subjects are selected because of their convenient

accessibility and proximity to the researcher.

3.6 Sample size

One of the pivotal aspects of planning a study is the calculation of the sample size. It is naturally

neither practical nor feasible to study the whole population in any study. Hence, a set of

participants is selected from the population, which is less in number (size) but adequately

represents the population from which it is drawn so that true inferences about the population can

be made from the results obtained. The formula for calculating the sample size is as below;

Z 2 * (p) * (1-

p)

c 2

Where:

Z = Z value (e.g. 1.96 for 95% confidence level)

p = percentage picking a choice, expressed as decimal

(.5 used for sample size needed)

c = confidence interval, expressed as decimal

(e.g. .04 = ±4)

3.7 Research instruments

A c ombina t ion o f qua l i t a t i ve and quan t i t a t i ve r e se a r ch me thods wi l l be

u se d i n ob t a in ing information from the bank branches selected for the study. It is

intended that the information gathered in the course of this work will enable the

researcher to the scenario of MFIs and women financial empowerment in Kenya as a basis

for comparison with generally accepted practices and make recommendations for improvements.

Basically, the sources of data collected exist in any research methodology, namely; primary and

secondary sources.

3.7.1 Primary Sources of Data

For the purpose of this work, the researcher will collect the data through the use of questionnaire,

structured interview, and observation. A questionnaire is as a data collecting instrument

comprising of questions designed fo r r e sponden t s t o ans we r . The s tudy r ecogn i ze s

tw o types o f ques t i onna i r e s , s t r uc t u r ed questionnaires and open ended questionnaire.

The structured questionnaire requires a respondent to answer a question by simply

choosing the appropriate answer from options provided. The open-ended questionnaire

provides a space for the respondents to write their answers. With the structured questions,

responses may be easily quantified, but when it comes to obtaining of  i n fo rma t ion

wh i ch a r e sea r ch ma y no t even e xpec t f r om the r e sponde n t s , t he open

ended questions would be better. For this research, both types of questions will be used in a

single questionnaire to give better results.

3.7.2 Secondary Sources of Data

Secondary data is the information collected by other agencies but with the utility of

the researcher in this study. Much of the facts presented in this research will come from

se conda ry da t a . I t w i l l p rov ide a s t a r t i ng po i n t f o r t he r e s ea r c h p ropos a l .

I n t h i s r e s ea r ch , secondary data will comprise information from text books and

other relevant publications. The following sources will provide the secondary data needed

in this research: Textbooks by various authors on co-operative development; Seminar

papers on women empowerment organized by women empowerment programs in Kenya;

Annual reports of women empowerment programmes and MFIs in Kenya; Daily news

papers, business magazines, and periodic journals, and Internet resources including

statistics by the world bank and census report.

3.8 Piloting of research instruments

Pilot studies' refers to mini versions of a full-scale study, as well as the specific pre-testing of a

particular research instrument such as a questionnaire or interview schedule. Pilot studies are a

crucial element of a good study design. Conducting a pilot study does not guarantee success in

the main study, but it does increase the likelihood.

3.8 .1 Reliability and Validity of Research instruments

The study will ensure validity and reliability in the research methods and the data collection tools

to be used. In validity, this study will ensure that the data collection tools measure what they are

supposed to measure (Smith, 2010). To guarantee this, the data collection tools will be piloted to

ensure that the tools are well understood by the respondents, and that they address

the research objectives and questions. Collections will be done before printing out

the final copies of tools that will collect the data. To ensure reliability in this study,

common questions will be asked. All the data collection instruments will comprise

standardized questions for all the respondents. Interpretation of the questions to

different respondents according to their levels of understanding will be done with

caution, in order to avoid bias from the researcher. According to Mugenda &Mugenda

(1999), reliability is the degree to which results obtained f rom ana ly s i s o f t he

da t a ac tua l ly r e p re s en t t he phenome na unde r S tudy .

3 .9 Data c o l l e c t ion in s t ru men ts

For the purpose of this work, the researcher will collect the data through the use of questionnaire,

structured interview, and observation. A questionnaire is as a data collecting instrument

comprising of questions designed fo r r e sponden t s t o ans we r . The s tudy r ecogn i ze s

tw o types o f ques t i onna i r e s , s t r uc t u r ed questionnaires and open ended questionnaire.

3.9.1 Data analysis and presentation

Data analysis consists of examining, categorizing, tabulating or otherwise re-combining the

evidence, to address the initial propositions of a study.’ (Yin, 1984: 99) Data analysis is the

process of developing answers to questions through the examination and interpretation of data. 

The basic steps in the analytic process consist of identifying issues, determining the availability

of suitable data, deciding on which methods are appropriate for answering the questions of

interest, applying the methods and evaluating, summarizing and communicating the results.Data

will be presented by use of bar graphs and pie charts.

3.10 Ethical considerations.

Ethics are measures which are connected with beliefs and principals about what is right and

wrong (A.S. Hornby 2010). The issue of ethics is very important in research despite the high

knowledge gained through research; knowledge cannot be pursued at the expense of human

dignity. The following ethical considerations will be made;

3.10.1   Respect Individual Autonomy

Autonomy means the freedom to decide what to do. Even when someone has signed a Consent

Form, they must be made aware that they are free to withdraw from the study at any time,

without giving a reason. They must also be able to request that the data they have given be

removed from the study.

3.10.2 Avoid Causing Harm

The duty of the researcher is not to cause harm. Judgments need to be made about what are

acceptable levels of harm.

3.10.3  Maintain Anonymity and Confidentiality

Making data ‘anonymous’ means removing the contributor’s name.. Other information can help

to identify people, for example: job title, age, gender, length of service, membership of clubs,

and strongly expressed opinions. The more pieces of information that are presented together, the

easier it is to identify someone.  Organizations, units, and groups may also need their anonymity

protected. Geographical information, combined with the type of organization, can give away

identity quite quickly. Take as many precautions as you can to protect anonymity, and only

promise the level of anonymity that you can realistically provide.

.

REFERENCES