Access to digital Nano-credit and the economic welfare: a case study of the low-income earners in Nairobi County
Oyier, Jared Odhiambo
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Digital nano credit has gained prominence in Kenya because it serves the portion of the population which has not been reached effectively by commercial banks. The requirements for qualification are relatively relaxed as compared to those of the commercial banks; they also process loan request faster than most of the commercial banks. The justification for the study is premised on the fact that little attention has been devoted to study the impact of digital nano credit on the economic welfare of the recipients. Moreover, the existing empirical evidence is inconclusive in the direction of the association. Therefore, the study sought to find out the impact of access to digital nano credit on the economic welfare of the low-income earners in Nairobi. The supplementary objective of the study included; investigating the factors considered by digital nano credit companies before they issue digital-nano credit and how the usage of digital nano credit affect the economic welfare of the low-income earners. The study was anchored on three theories; the neoclassical theory of welfare, restriction of opportunities theory of poverty and the individual deficiency theory. The research used a cross-sectional survey research design to collect and analyze the data. Purposive stratified random sampling technique was used to select a representative sample size of 196 respondents from the population. Data was gathered through a structured questionnaire on a target sample size across the 17 sub-counties in Nairobi. The response rate for the study stood at 85.71%. The study found that there is a statistically significant positive relationship between economic welfare, access to digital nano credit, usage of digital nano-credit, the age of the breadwinner, household income. The size of the household was found not to have a negative relationship with economic welfare; however, this relationship was not statistically significant. The study also concluded that there is a constant level of economic welfare which is not affected by access to digital nano credit. The study also confirmed the assumptions of the neoclassical theory of welfare and restrictions of opportunities theory. However, the results of the study do not support the assumptions of the individual deficiency theory. The research, therefore, proposes that the government should regulate the issuance of digital nano credit and engage in market correction policies which can ensure that micro businesses are adequately supported to grow. Finally, the study suggests that an independent study should be undertaken to assess the impact of digital nano credit to the performance of sole proprietorship micro businesses.