Abstract

This study reviews the qualitative and quantitative research on the impact of microfinance (especially micro-credit) on the poor in Kenya to enable practitioners, donors and policy-makers understand the nature of the evidence available. Despite a large body of impact studies on the effectiveness of microfinance on the poor in Kenya, no systematic review has been conducted that brings together all these studies and evaluates the nature of the evidence of microfinance's impact on the poor in Kenya. In general, this study discovers that microcredit positively impacts the poor; however, the results are not uniform. The proposition of microfinance as the panacea for poverty and women's empowerment might be flawed. On the other hand, microcredit could cause more harm than good if the amount is spent on consumptive activities rather than investing in the future or if the businesses fail to generate enough profit. The study recommends consideration of both the potential good and the potential harm whilst making policy decisions on microfinance in Kenya. Microfinance impact assessment studies should develop a standardised methodological framework to produce consistent results. Similarly, microfinance should not be considered the only way of rescuing the poor from the chains of poverty; in fact, other structural solutions should be sought for solving structural problems such as poverty.

Key words: Microfinance, micro-credit, Kenya, micro-loans, financial services, poverty.