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Micro-enterprise Credit and its Effects in Kenya: An Exploratory Study (summary)

Micro-enterprise Credit and its Effects in Kenya: An Exploratory Study (summary)

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Published by Martin Walsh
Summary of a study of the impacts of microenterprise credit in Kenya by Jennefer Sebstad and Martin Walsh.
Citation: Sebstad, J, & Walsh, M. T. 1991. Micro-enterprise Credit and its Effects in Kenya: An Exploratory Study. Report by Ernst & Young to USAID, Washington D.C.
Summary of a study of the impacts of microenterprise credit in Kenya by Jennefer Sebstad and Martin Walsh.
Citation: Sebstad, J, & Walsh, M. T. 1991. Micro-enterprise Credit and its Effects in Kenya: An Exploratory Study. Report by Ernst & Young to USAID, Washington D.C.

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Published by: Martin Walsh on Apr 10, 2009
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05/11/2014

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Micro Enterprise Credit and itsEffectsinKenya:'An Exploratory StudyJennefer Sebstadand Martin WalshEXECUTIVE SUMMARYThis reportpresentstheresultsofastudyon the impacts ofmicro-enterprise credit in Kenya.It is basedprimarilyupon'interviewswith5Omicro-enterprise cred'it c'lents drawn f romtwodifferent cred'itprograms,one urban and theother rural .Thepurposeof the study was twofold.Its first objectivewasto assesstheimpacts of micro-enterprisecredit upon clients'enterprjses, their households, and the widerenterprise environmentin which they operate. A second objectivewas to use the resultsto developaworking methodology foruseinfutureimpactstudiesandprogrameva'l uat'ions.The main textprincipalfindi ngsthe report describesand analyzes thethe study.It shows that overal limprovements in the f inancialperformanceofthe assistedenterprises during the loanperiodwere impressive.Averagemonthlysales increased by 75%,direct value addedrose by 12Q%andcash incomes increased by 110%.However, there weresignificantdifferences between'indiv'idualenterprises;not al I ofthemperformedas wel 1 as the overa'lI figuresi mply.30% of theenterprise experienced a reductionin sa'les, 26%adrop'indirectvalueadded,and 56%a fa]1incash'income.There was also lim'itedevidenceofunderlying structural improvementswi th'intheenterprises,Averagenetprofitmargins remained constant at .22although a third of clients stillsucceeded in increasing theirmargins. This suggests f imited improvementin businesspracticesandprofitabi I ity'inthe remaining twothi rds of the enterprises.As the above data suggest,the benefits ofloan investmentwere not spread evenlyamong the clientsinthestudy samplealthough some consistentpatternsemerged, Onestriking finding,for example,was that theloans typica'l'lyhad a muchgreaterimpactin the urban sample compared t,o therural. Production enterprisesgeneratedhigher levels of sales,direct value added,andcashincomes, but trade enterprisesincreased thesefiguresat thehighest rate during the loanperiod.There were no simplere'lations between loan impacts andgenderof the cl ients in theovera'l I sample.However,signif icantgenderdifferencesemerged inconsideringtheurban and rural samplesseparately. The financialstatusofurbanwomen'senterprises'improvedmuch more thanurbanmen's. Exactiy the reverse happened in therural sample, wherewomen's enterprisesperformedless wellthan men's,Data on employment show thatthe total numberofemployees(exclud'ingenterpriseowners) increased by37% and the averagenumber of employeesperenterpriserose from 1.18 to 1.62. The
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average'investmentpernewjobcreated worked out to be Ksh.41,336/US$1797 ,'lessthanone eishththe estimated i nvestmentneededtogeneratea modernwagejobinKenya.However, whi'leemploymentincreasedquantitat'ively,thestructureofthe laborforce did notchangequitesopositively.Theproportionofmentowomen mployees(eOx:2O%)hardlychanged. Theproportionof unpaidtopaidworkers(74%226%)andful l-time topart-t'imeemployees(63%:37%)alsostayed muchthe same.Simi arly, the distributionof workersby statuswageemployees(33%), piecerate workers(19%),casual laborers(22%),andfamilyworkers(2ax)--did notchange.Of the fewnewjobsgeneratedforwomen, most werejnunpaidwork.Atthe householdlevel, increasedcash incomes from theassistedenterprisestranslatedinto an est'imated 31%increase inhouseholdincomes.Overall, theassisted enterprisesprovided42%of totalhouseholdincomes.Over halfofthewomen n thesampleswerethe soleorprimaryearnersfortheir famif ies, ind'icatingtheimportanceof micro-enterpriseincome forthem. Womengenerajlyreportedthat theassi stedenterprisesdidnot'increasethei rworkloads,buttheygidcomplainabout theirhusbands'wish toasserteconom'iccontrol overthe'incomef romthei r enterpriseactivit'ies.Beyondthehouseholdtheloanshada'limited impacton thestructureof backwardenterpriselinkages, aithoughtheclients didshifts'l ghtlyf rom retaiI to wholesalesuppl iers.There i{as,however,apositiveimpactupon the structureof forwardlinkages.Whilemost of theclrents dependedlarge'lyonprovid'inggoodsandservicesto ind'ividualconsumers,there wasa significantincrease(58%i nthe numberselI'ingto I arger customers.These newcustomerswereprimarilyother micro-enterprisesin theurban areaandpublic institut'ions(especial'lyschools)inthe ruralarea.Atthesametime, €rh impressiveproportionof the cl ientsprovidedgoodsor servrcesthat were new orunique to the community(46%),savedtimeor labor(4O%),or were lower inpricethanthoseprovjdedby theircompetitors(30%).The'loansddnothave an i mpact on the regu Iatoryenv'ironment,but regulatoryconstraints did impinge negativelyonclients'businessoperationsandthusthe effect'ivenessof theirloans.The most successfu'lcljentsin thestudyweremuch morelike]ytobe workingoutside the regulatory envi ronment thanthosewho werelesssuccessful.An appendixtothereportpresentsmethodologicairecommendationsforfuture studres. Theproposedapproachisessent'ially apragmaticone,anda draftquestionnaire ispresentedtogetherwithnotesonits useandapplication'inthef ield. Th'issurveyinstrument can be adapted to a varietyofcontextsand uses,'includingmonitoring and evaluation ofcredit impacts w'itfrinmicro-enterpriseassistanceprograms.It'isalso des'igned to be applied

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