The impact of village banking on dryland rural household poverty alleviation: Case of Kenya’s K-REP bank

Abstract

The research on this paper investigated the impact of one village Bank: Kenya Rural Enterprise Programme Bank. A case study approach was used in which the K-REP programme was given ex post evaluation. The evaluation was conducted for the purpose of drawing best practice lessons on the impact of village banking on poverty alleviation. The research findings were expected to register a significant impact on the incomes of the participants considering the popularity of microfinance institutions in Kenya. The results however showed that even though the K-REP programme was effective in enhancing access to credit and development of small and medium-sized businesses, the chief objective of raising household incomes remained a distant mirage. Few of the community members held shares in the village bank owing to prolonged droughts and hence lack of savings from crop production. Similarly, access to credit facility was undermined by the droughts which eroded the borrowing confidence of households. Consequently, only the main business community in the area fully benefited from the programme. The results led to the conclusion that village banking has the potential to reduce poverty in rural areas of Kenya. However, their operations should be aligned with agricultural production calendar of the target community. Further, integration of strategies such as crop insurance schemes into the bank programme would be relevant towards mitigation of the effects of drought on agricultural production, and cushion farmers against unprecedented income shortfalls.

Keywords: Impact, village, banks, rural, dry land, poverty, alleviation.