Effect of Credit Terms on Financial Inclusion Among Self-help Group Financing in Informal Settlements in Kenya: A Case Study of Kibera Slum

Abstract

Financial inclusion is a vital element of growth in any economy. It has led to the economic growth of 15 OECD and 50 non-OECD countries. Despite its relevance, the optimal rates of financial inclusion in Kenya have not been achieved. The wide gap between financial inclusion among the lowest wealth quintile at 12.67% in comparison to the rates of financial inclusion of the highest wealth quintile at 76.4% in 2021 is a huge cause of concern. Lower rates of financial inclusion among the less privileged have translated to high poverty rates, lower living standards and hampered economic growth. The main objective of this study was to determine the effect of credit terms on financial inclusion among self-help group financing in informal settlements in Kenya, a case study of Kibera slum. The study was founded on the demand theory and the rational choice theory, to bring to light the relationship between credit terms and financial inclusion in informal settlements in Kenya. A descriptive research design was used and the 237 registered self-help groups in Kibera slum formed the population of the study and were studied in their entirety. The data was collected using a questionnaire and analysed using SPSSv25 then presented in form of tables and figures. Descriptive statistics was performed using frequencies, percentages, means and standard deviations. Inferential statistics was conducted using the regression model to test the hypotheses of the study. The study established that credit terms had a positive significant effect on financial inclusion among self-help group financing in informal settlements in Kenya. According to the leaders of the self-help groups, the more favourable the credit terms offered in self-help groups, the wider the adoption of financial services by the members of the self-help groups. This study therefore recommends that financial service providers should offer financial services with credit terms tailored to suit the needs of their target market to increase affordability of financial services, thereby increasing financial inclusion.