Effects of informal savings activities on poverty reduction at the household level, a case study of saving internal lending communities in Naivasha,

Abstract

Savings internal leading communities (SILC) are groups formed by community members who are known to each other. They are user-owned and managed with no external interference, with the aim of creating sustainability, accessibility of the loans, transparency and flexibility in the group activities. SILC group members are given loans with small interests and the interest gained throughout the cycle is shared among members at the end of each cycle. The aim of the study was to investigate the effects of informal savings activities on poverty reduction within household levels with a case study of SILC groups in Naivasha sub county Nakuru. The study was guided by the following objectives: To establish how activities of Savings and internal lending communities attribute to poverty reduction within households, to determine the role of social fund in poverty reduction within the household‟s level. To examine the impact of households‟ participation in informal saving towards poverty reduction within the household level and to examine the role of SILC in empowering households towards risk management for households all within Naivasha sub county Nakuru County. The research focused on this area because there are many low income earners and previous research didn‟t point out specifically the various spheres on how SILC has transformed lives more so within the households. There has been no research done on households poverty reduction in Naivasha sub county Nakuru County. The pilot study was conducted in Gilgil Sub County to provide the basis for testing the validity of the data collection instrument. The researcher used simple random sampling procedure and purposive sampling. Sample determination formula was used to establish a sample size of 87 caregivers and 13 group leaders were involved in the research. The test retest technique was used to ensure reliability of research instruments while validity was ensured through pilot testing and reviews. Questionnaires were used to gather information from respondents especially the members who have in the past benefited from the association and key informant interviews were conducted to group leaders. The study used both qualitative and quantitative ways to analyze data. The data obtained was cleaned, verified and analyzed by statistical package for social sciences (SPSS) and content analysis. The qualitative data was analyzed using narrative analysis, while the quantitative data was analyzed using tables. The study revealed that savings internal lending communities have enabled members to save their money, borrow and invest the amount in different ways such as purchase of cattle, poultry, land and start of small businesses which require little capital like green grocers and cereal shops and there are those who pay school fees for their children through loans and dividends at the end of cycle. SILC has proved to be a mechanism to prosperity through training of caregivers in agriculture, business management and record keeping apart from training. Members have a social fund which caters for emergency need thus reduce anxiety and avoid usage of the saved amount for development. The study concludes that the saving internal lending communities had a significant influence on poverty reduction at households within Naivasha Sub County.The study recommends that there is a need for further research to establish the influence of Savings internal lending communities in education in Naivasha sub county Nakuru.