Effects of Loan Repayment Mechanism on Clients’ Livelihoods Sustainability: A Case of Deposit Taking Microfinance Institutions in Nakuru County, Kenya

Abstract

The Microfinance Institutions (MFIs) clients’ livelihoods sustainability largely relies on the institutions managerial functions whose aim is to achieve the vision of poverty alleviation through encouraging the poor people to save and get loans in order to begin or enhance their small businesses thus improve their living standards as well as achieve livelihoods sustainability. The study explored the relationship that exists between deposit taking MFIs governance and clients’ livelihoods sustainability in Nakuru County, Kenya. Specifically, this study sought to establish the relationship between loan repayment mechanisms on livelihood sustainability of clients of deposit taking MFIs in Nakuru County, Kenya. The study adopted the multi-stage sampling technique whereby the MFIs were purposefully selected while the respondents were systematically sampled by the use of the nth individual. The sample size consisted of 580 MFIs clients and 10 managers out of 1,954,111 target population. The Primary data was collected through the use of questionnaires and key informant interview guides. The study utilized descriptive statistics to describe the study’s variables characteristics. Multiple regression analysis was conducted to establish the relationship between the independent and dependent variables. The Regression results indicate a positive relationship between loan repayment mechanisms and the clients living standards at 1% significant level and the Gender of the client had a significant negative impact on livelihood sustainability as related to loan repayment at 10% significance level. The study concludes that while majority of the microfinance institutions are female clients whose gender role is mainly influenced by cultural prescribed gender roles, the current gender legal right need to be sensitized in order to pave way for households’ sustainable livelihoods through improved access to productive resources. Therefore, this study recommends that the MFIs focus more on capacity building for the clients in terms of financial management and investments so as to ensure proper utilization of savings and income generated from their business. In this concern, any policy intervention should aim at, among other factors, ensuring proper financial advice to the clients to ensure that sustainable Livelihoods for the clients are attained.