Microfinance lending and women empowerment in Nakuru county informal settlement in Kenya

Abstract

This study explored the effect of microfinance lending on women empowerment in the slums of Nakuru County, Kenya. The focus was on four microfinance service components: institutional lending services, saving services, micro insurance services, and financial training, and their relationship to economic, social, and psychological dimensions of women's empowerment. The study adopted a descriptive survey design targeting women aged 18-60 years residing in selected slum areas of Nakuru County who were current or potential beneficiaries of microfinance services. From a target population of 400 women, a sample of 200 respondents was selected using simple random sampling from Kivumbini slums of Nakuru, achieving a high response rate with completed questionnaires. Data was collected using structured questionnaires with closed-ended questions employing a 5-point Likert scale. The questionnaire consisted of six sections covering demographic characteristics and the five study variables. Data analysis involved both descriptive and inferential statistics, with descriptive statistics including frequencies, percentages, means, and standard deviations to summarize respondent characteristics and variable distributions. Inferential statistics employed Pearson correlation analysis to examine relationships between variables and multiple regression analysis to determine the predictive power of institutional lending services, saving services, micro insurance services, and financial training on women empowerment. Diagnostic tests including multicollinearity, heteroscedasticity, and normality tests were conducted to ensure data met regression assumptions. The results revealed that all microfinance services had significant positive relationships with women empowerment, with lending services showing the strongest correlation (r = 0.779), followed by saving services (r = 0.776), microinsurance services (r = 0.768), and financial training (r = 0.732). The regression model demonstrated substantial explanatory power (R² = 0.723, F = 118.033, p < 0.05), with lending services being the strongest predictor of women empowerment (β = 0.275, t = 3.920, p < 0.05), followed by saving services (β = 0.245, t = 3.405, p < 0.05), microinsurance services (β = 0.244, t = 3.561, p < 0.05), and financial training (β = 0.180, t = 2.803, p < 0.05) respectively. The study concluded that microfinance services significantly contribute to women empowerment, though challenges exist regarding affordability and accessibility. The study recommended that microfinance institutions should redesign products to address affordability concerns, strengthen financial literacy programs, improve microinsurance awareness, and expand training availability. The findings provided evidence-based insights for policymakers, microfinance institutions, and development practitioners on optimizing microfinance services to enhance women's empowerment in urban slum contexts.