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Abstract
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Article Information:
Effect of Credit on Household Welfare: The Case of “Village Bank” Credit in Bomet County, Kenya
J.K. Langat, B.K. Mutai, M.C. Maina and H.K. Bett
Corresponding Author: Jackson Kipngetich Langat
Submitted: 2011 January, 21
Accepted: 2011 February, 23
Published: 2011 May, 25 |
Abstract:
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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.
Key words: Credit, effect, heckman, village bank, welfare, ,
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Cite this Reference:
J.K. Langat, B.K. Mutai, M.C. Maina and H.K. Bett, . Effect of Credit on Household Welfare: The Case of “Village Bank” Credit in Bomet County, Kenya. Asian Journal of Agricultural Sciences, (3): 162-170.
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ISSN (Online): 2041-3890
ISSN (Print): 2041-3882 |
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