Effect of community-based microfinance services in financial empowerment of small-scale women traders in Kisumu west sub-county, Kenya

Abstract

Kenya’s microfinance outreach continues to grow steadily, playing a vital role in the 15% share that Sub-Saharan Africa contributes to global microfinance. Among its most transformative impacts is the empowerment of women: over 80% of women engaged in microfinance programs report increased financial independence. These women are twice as likely to start or expand a small business, and many experience greater autonomy in both family and community decision-making—marking microfinance not just as a financial tool, but as a catalyst for social change. Previous studies have focused on formal microfinance institutions, overlooking community-based models that play a critical role at the grassroots. This study examined the effect of community-based microfinance services on the financial empowerment of small-scale women traders in Kisumu West Sub-County, Kenya. Kisumu West Sub-County was selected due to its high poverty levels, limited formal financial access, and the strong dependence of women traders on informal financial systems like savings groups and rotating credit schemes—making it an ideal setting to assess the impact of community-based microfinance on financial empowerment. Specifically, the study assessed the effect of access to credit, financial literacy, and effect savings on financial empowerment of small-scale traders in Kisumu west sub-county. The study was anchored on the Empowerment Theory and further guided by financial inclusion and financial literacy theories. The target population was 484 small-scale women traders benefiting from community-based microfinance initiatives. A descriptive research design was adopted, with a sample of 400 respondents selected through simple random sampling. Data was collected using structured questionnaires, tested for validity and reliability, and analyzed using both descriptive statistics-frequencies, percentages, means, standard deviations and inferential analyses-correlation, linear regression, and multiple regression with SPSS. Findings revealed that community-based microfinance significantly contributes to women’s financial empowerment. Access to credit was positively associated with improved financial outcomes (β = 0.101, p < 0.05), financial literacy had a strong impact (β = 0.305, p < 0.05), and savings mobilization demonstrated the greatest effect (β = 0.399, p < 0.05). Collectively, these factors enabled women to increase household income, expand their businesses, and strengthen decision-making power both economically and socially. The study concludes that community-based microfinance is a vital avenue for empowering women traders in Kisumu West Sub-County. It recommends strengthening loan management to reduce defaults, enhancing financial literacy training, and adopting digital savings mechanisms to improve accountability. Policymakers and development actors should leverage community-based models as complementary frameworks to formal microfinance institutions in addressing poverty and promoting gender equity.