ABSTRACT

The study was set to investigate Microfinance and Poverty Reduction which was guided by the following objective; to find out the nature of products and services offered by MFls in Katikamu Sub-County, to find out the contributions of MFIs in Poverty reduction, and to flnd out the challenges faced by people when using Microlinance service in Katikamu SubCounty. The study employed Purposive sampling and simple random sampling techniques to select 291 participants that constituted the sample size of the research. The research used both primary and secondary data. The primary data was got from clients and from management. The data was obtained by use of semi structured questionnaire and interviews. Secondary data was obtained from published materials which included journals. text books, magazines and newspapers. The findings of the study revealed that most of clients were male who constituted 64.6% of the sample size. Significant number of clients 58.42 % acknowledge positive contributions of’ MFIs loans towards poverty reduction like increase in income, improving education and acquisition of assets. The microfinance loan terms and conditions are stringent with high interest rate 65.6%, short grace period as well as high demand of collateral security. Yet rural poor beneficiaries engage in businesses which take long to mature (gestation period). The study concluded that illiteracy, lack of collateral and inadequate management and capacity by clients are some of challenges facing microfinance in poverty reduction. The study yielded the following recommendation; low interest ratio, lengthen the repayment period, sensitization of clients. Other than the financial support, it is recommended that MFIs should at all-time give professional advices to clients