UTILISATION OF MICRO FINANCE INSTITUTIONS FUNDS BY BORROWERS IN ARID AND SEMI-ARID LANDS IN KENYA: A SURVEY OF MARALAL TOWN.
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The study sought to establish whether borrowed funds from MFIs are effectively applied and used for the intended purposes. Despite a lot of effort in terms of resource availability, the poverty levels are still very high and the defaulted loans in Maralal town amounts Kshs. 15 million. There is a number of Microfinance Institutions within Maralal town like the Kenya Women Finance Trust (KWFT), Jamii Bora Trust, Government of Kenya Youth Enterprise Fund, Women Enterprise Fund and the Kenya Industrial Estates. Despite this intervention, Samburu is still among the poorest districts in Kenya. The study was based on the following objectives: To find out whether policies of Microfinance institutions affects access to credit; To find out whether economic characteristics of entrepreneurs affect applicability and usage of borrowed funds; To examine whether literacy levels affect applicability and usage of borrowed funds; To find out the relationship between capacity building initiatives and applicability and usage of borrowed funds. Data collection was done using questionnaires. The data collected was analyzed through both descriptive and inferential statistics (Spearman Rank Correlation). The analyzed data is presented in form of tables. The study has established that income levels, expenditure levels, poverty levels and access to credit are factors that determine the use of borrowed funds from MFIs. The literacy levels of borrowers identified in the study are: no formal education (77.7%), primary education (72.85%), secondary education (78.9%), tertiary education (78.9%) and university education (78.9%). These literacy levels are a determinant of credit access and use from the MFIs. Besides, the literacy levels have a significant relationship of 0.01 level with use of borrowed funds. The MFI policies that affect the use of borrowed funds are related to lending, interest rates, credit recovery and MFI regulation. These policies are not friendly to credit access and use. Capacity building initiatives that influence the use of borrowed funds have been identified as entrepreneurial skills, innovativeness, and fund raising skills. The findings of the study will be useful to the surveyed MFIs, the Government and other researchers interested in this field.