Effect of Credit on Household Welfare: The Case of 'Village Bank' Credit in Bomet County, Kenya

摘要

Many of the credit programs specifically target the poor on the premise that they are more likely to be credit constrained and have restricted access to the wage labour market. The purpose of this study was to assess the role of credit service on welfare of the microfinance clients. The study area was Bomet County and the sample was drawn from Mulot and Silibwet "village banks". A sample of 125 "village bank" members was selected, out of which 91 had used the credit service. Primary data on the selected respondents was collected using a structured interview schedule and secondary data was obtained from the selected "village banks" operating in the study area. Analysis of Variance and Heckman's selection model which corrects for selectivity bias in the sample was used. The model consists of a probit equation (borrowing participation equation) and target equation of per capita household expenditure. The results from the study indicated that "village bank" credit positively influences household welfare. This means that there is a positive relationship between the amount borrowed and household welfare. The household income of credit participants is also significantly higher than that of the non-participants. Besides credit, education, age of the household head, farm and off-farm income play a significant role in determining the wellbeing in a household. Thus the government and other development agencies can inject an additional loan capital to the village bank. This will enhance on their outreach on credit services.