Effects of Microfinance Institutions Credit Conditions on Youth Livelihood Development in Nairobi County
Main Article Content
Keywords
Credit condition, youths, financial services, access, livelihood development, microfinance institutions
Abstract
Youth unemployment is a pressing challenge in Kenya, particularly in urban centers like Nairobi County, where a large and growing youth population often struggles to secure stable livelihoods. Microfinance institutions (MFIs) play a central role in providing financial services to underserved communities, including youth, who may not meet the stringent requirements of traditional banks. However, the specific conditions under which these credits are offered by MFIs influences their accessibility and, consequently, their impact on the livelihood development of young individuals. This study examined the effects of microfinance institutions (MFIs) credit conditions on youths’ livelihood development in Nairobi County. This study was guided by credit rationing theory and applied embraced positivist and interpretivist approaches. The research adopted exploratory sequential mixed method research design, collecting quantitative data through structured questionnaires and key informant interviews with MFI staff and local enterprise officers. The study targeted 3,400 youth drawn from groups across 17 sub-counties in Nairobi County. Yamane (1967) formula was used to obtain 358 youths from the target population. The study used a combination of stratified random sampling, purposive sampling and census techniques to select respondents from different categories. Quantitative data were gathered through the use of structured questionnaires, whereas qualitative data were obtained using key informant interview guides. The quantitative data were analyzed using both descriptive and inferential statistical methods, while the qualitative responses were organized and presented using thematic and narrative analysis techniques. Findings revealed that high interest rates and rigid repayment terms negatively affected the ability of youth to invest in and expand their businesses. Collateral requirements excluded a significant portion of the youth, particularly those in informal settlements and low-income brackets. However, flexible loan products such as group-based lending and mobile credit platforms were associated with improved access and positive livelihood outcomes, including increased savings, asset acquisition, and employment generation. The study also established a significant negative correlation between credit conditions and youth livelihood development in Nairobi County (r = -0.523, p = 0.011). This means that stricter credit requirements such as collateral, guarantors, and formal documentation limit youth access to finance, ultimately undermining their ability to grow income-generating activities. Further, regression results revealed that credit conditions have a negative and statistically significant effect (β = -0.596, t = 4.74, p < 0.05) on youth livelihood development. In conclusion, youth credit conditions significantly influenced livelihood development in Nairobi County. The study recommended that MFIs adopt more youth-responsive lending frameworks that reduce collateral demands, offer longer repayment periods and integrate mobile-based services. It further suggested capacity-building programs to improve youth financial management and entrepreneurial readiness.
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Luciana Chepkoech Koske , School of Arts and Social Sciences, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Arts and Social Sciences, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
Alice Kurgat , School of Arts and Social Sciences, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Arts and Social Sciences, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
Peter I. Omboto, School of Business and Economics, Moi University, P. O. Box 3900-30100, Eldoret, Kenya
School of Business and Economics, Moi University, P. O. Box 3900-30100, Eldoret, Kenya