Loan Repayment And Sustainability Of Government Revolving Funds In Murang’a County, Kenya

ABSTRACT

In the attempt to alleviate poverty and empower the deprived, many non-governmental organizations and Government line agencies have been providing revolving funds and social services to rural dwellers in Kenya. The role of these funds is to help the rural poor, to earn a decent living, through their on-going income-generating activities. The government of Kenya overtime has formulated a series of revolving funds to counter the problem. The most notable and current, is the Youth Enterprise Development Fund and the Women Enterprise Fund which were both conceived in 2006 and 2007 respectively. In these programmes, identifying the marginal borrower has not been a simple case owing to the complex interplay of costs, returns, and risks in credit markets. The role of the government in providing start-up funds and their relationship to sustainability is crucial. The main focus of this study was to analyze the loan repayment and sustainability issues of government revolving funds in Murang’a County. The study was guided by the following specific objectives; to analyse the effect of loan repayment and sustainability of government revolving funds; to examine the implication of socio-economic functions of groups to government revolving funds sustainability; to establish the effect of borrower characteristics to government revolving funds sustainability and to determine the effect of technology on government revolving funds sustainability in Murang’a County. The study adopted a positivism philosophy of research, where the researcher was independent on what was being observed and studied. Descriptive survey design was used to determine the level of government revolving fund repayment and its effect on sustainability for other borrowers. The target population was 1520 social and economic groups in Murang’a County. Clustering and Simple Random Sampling techniques were applied to select a sample size of 307 groups, in addition a census of 16 constituency credit officers, who were also interviewed. This, in total accounted to 19.5% of the total population. A questionnaire and an interview schedule were used to collect data. Descriptive data were analysed using tables and charts. Quantitative data were analysed using Chi-square, Analysis of Variance and Logit Regression Model. The results indicated that government revolving funds operation procedure, socio-micro group functions and borrowers’ characteristics were statistically significance to loan repayment and sustainability. The influence on technology to government revolving fund was statistically non-significant to repayment and sustainability. The study recommended training of young individuals on how to run businesses at the earliest time possible for them to appreciate owning and running own businesses. The review of the education curriculum to reverse the teaching business studies in primary schools was recommended. The study conclude that the WEF and the YEDF need to be institutionalized to increase the overall amount and efficacy in projects launched by the groups and individual beneficiaries; that there is a dire need to reduce external reliance by weaning the WEF and YEDF away from dependence of external sources including the government and that; though technology did not have a statistical relationship to loan repayment and sustainability in Murang’a County, the government should strengthen this facility to enable loanee follow-up and enhance early detection of defauters in order to take early action.