INTEREST RATE CEILINGS AND THE OPERATIONS OF MICROFINANCE INSTITUTIONS IN KENYA A CASE STUDY OF KENYA WOMEN FINANCE TRUST

TABLE OF CONTENTS

DECLARATION ..................................................................................................................................... i

APPROVAL ............................................................................................................................................ ii

TABLE OF CONTENTS ....................................................................................................................... iii

CHAPTER ONE ................................................................................................................................... 1

1 . 0 Introduction ....................................................................................................................................... 1

I .1 Background to the Study ................................................................................................................... 1

1.2 Statement of the Problem .................................................................................................................. 4

1.3 General Objective .............................................................................................................................. 4

1.3.1 Specific Objectives ......................................................................................................................... 4

I .4 Research Questions ........................................................................................................................... 4

1.5 Scope of the scope ............................................................................................................................. s

I. 5. I Content scope ................................................................................................................................. 5

1.5.2 Geographical study ......................................................................................................................... s

1.5.3 Time frame ..................................................................................................................................... s

I .6 Conceptual framework ...................................................................................................................... 6

CHAPTER TWO: LITERATURE REVIEW .................................................................................... 7

2.0 Introduction ....................................................................................................................................... 7

2. I Review of Related Literature ............................................................................................................ 7

2.1.1 Overview ofthe Market for Micro Finance in Kenya .................................................................... 7

2.2 Interest Rate Ceilings Protect Borrowers from Exploitation ............................................................. 8

2.2.1 Alternatives to Protect Customers .................................................................................................. 9

2.3 Effects oflnterest Rate Ceilings on Loan Provision ....................................................................... 10

2.3 .2 Critique to Interest Rate Ceilings ................................................................................................. 11

2.4 Challenges Encountered in Contraction ofthe Micro Finance Institutions .................................... 12

CHAPTER THREE: METHODOLOGY ......................................................................................... 15

3.0 Introduction ..................................................................................................................................... 15

3.1 Research Design .............................................................................................................................. 15

3.2: Research Population ....................................................................................................................... 15

3.3 Sample size ..................................................................................................................................... 15

3.4: Sampling Procedure ....................................................................................................................... 15

3.5 Data Collection methods ................................................................................................................. 15

3.¢> Data analysis ................................................................................................................................... 16

CHAPTER FOUR ............................................................................................................................... 17

4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION ............................................. 17

4.1 Overview ......................................................................................................................................... 17

4.2 Presentation of findings ................................................................................................................... 17

4.2.1 Analysis of customers' Questionnaires ........................................................................................ 17

4.2.2 Gender .......................................................................................................................................... 17

Table 4.1 gender of customers .............................................................................................................. 17

4.2.3 Education level ............................................................................................................................. 18

4.2.4 Fee charged when applying for loans ........................................................................................... 20

4.2.5 Analysis of employee's questionnaire .......................................................................................... 24

CHAPTER FIVE,;_SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS .................................................................................................................... 29

5.1 Overview ......................................................................................................................................... 29

5.2 Discussion and Interpretation .......................................................................................................... 29

5.3 Recommendations ........................................................................................................................... 30

5.3.1 Loans as a Source ofFinance ....................................................................................................... 30

5.3.2 Floating or Fixed Interest Rates ................................................................................................... 31

5.3.4 Difference ofKWFT Rates with Those of Commercial Banks ................................................... 31

5.3.5 Effects oflnterest Rate Ceilings On Individual Operations ......................................................... 31

5.3.6 Whether Interest Rate Ceiling Affect the Organization's Operations .......................................... 31

5.3.7 Whether Interest Rate Ceilings Affect the Rate of Loan Seeking ................................................ 32

5.3.7 How Often Interest Rates are adjusted ......................................................................................... 32

5.4 Summary ......................................................................................................................................... 32

5.5 Areas of Further Study .................................................................................................................... 32

REFERENCES .................................................................................................................................... 34

APPENDICES ...................................................................................................................................... 36

APPENDIX I: RESEARCH INSTRUMENTS ..................................................................................... 36

(A) QUESTIONNAIRE ........................................................................................................................ 36

APPENDIX II: BUDGET ..................................................................................................................... 41

APPENDIX III: TIME FRAME ........................................................................................................... 42