INFLATION ON HOUSEHOLDS EXPENDITURE IN MBITA DIVISION OF MBITA DISTRICT, KENYA: A SITUATIONAL ANALYSIS

Abstract

Purpose: Inflation is a concern in both developed and developing countries as it leads to a fall in profit margins and makes it difficult in drawing households’ budgets. The Medium Term Plan report (2008-2012) indicates that Mbita Division of Homa-Bay County has had the effects of inflation in recent times as many fish industries are closing down, an indicator of a fall in private domestic capital and also an increase in the unemployment rate. The purpose of this study was to determine the effect of inflation on the household expenditures in Mbita Division, Kenya. Methodology: The study adopted exploratory and correlation research designs. Exploratory research design gave an insight into the households’ expenditure behavior while correlation research design facilitated the establishment of relationships among the research variables. A sample size of 374 heads of households was selected from a total of 13,789 households in the Division. The individual respondents were drawn by the use of a simple random sampling technique. Primary data was gathered with the help of questionnaires, key informant interviews, focused group discussions, and observation, and Secondary data were collected from Government statistical abstracts, household records, and relevant textbooks. Regression as a tool of analysis was utilized to reveal the existing relationship among the variables and coefficient of determination to show the strength of the established model. The reliability of the data collection instrument was tested using the internal consistency technique in which the scores obtained from the subjects were correlated and the Cronbach’s Coefficient Alpha was be computed to determine the correlation among the items.Findings: It was discovered that 135(38%) spent more than Ksh 4000 per month six months ago compared to 159(44.8%) of the total respondents who spent more than the same amount currently in Mbita division. Recommendation: It was recommended that the households in Mbita division should spend only on the basic stuff and be advised on the micro-savings programs to assist in times of high inflation rates.