Assessment Of The Impacts Of Personal Loan On Poverty Alleviation: A Case Of Capital Development Authority Employees

ABSTRACT 

This study assessed the impacts of personal loans on livelihoods of workers, in particular Capital Development Authority workers. The study assessed the socio-economic, legal environments and policies, as far as personal loans are concerned in an attempt to raise the life standard/economic well-being of a worker and his/her dependants.    

In its execution, the study employed qualitative approach through structured interviews and questionnaires to enable the collection of information needed for the assessment of the impact of personal loans on poverty alleviation.  Data on impact of loans were analyzed using Statistical Package for Social Sciences (SPSS).Descriptive analysis like frequency and percentage were the main techniques.  

The findings of this study revealed that the personal loans as an intervention tool towards achieving economic well-being have both positive and negative impacts in poverty alleviation. While it was expected for loans to increase the workers‘ ability to do potential and profitable investment opportunities through the loans they take; the study found that majority of the respondents tended to use the loans for consumptions. There is no prudence in borrowing, workers take more debts just because loans are freely available with cheap interests, and hence the management of finance becomes a problem. Savings has become impossible, budgeting and planning a far dream. The vulnerability of respondents to life shocks and risks has increased and they live impoverished life than before. Further, the finding revealed that diversion of loans proceed is normal. There is neither follow up nor supervision by the financial institutions which offer the loans. Youth and educated workers have shown a tendency of purchasing nonproductive assets that create a somewhat artificial material well-being. However, Respondents with higher social position tend to utilize the loans better; their social position is a key determinant of financial literacy and also financial behavior. The researcher recommends that financial literacy lessons should be introduced in education curricula so that students can get this knowledge from early ages. As for those in employment already, through retirement seminars, their management should introduce financial literacy workshops so as to improve workers financial management skills. Approving of loans that subject the employee to salary deduction of more than 1/3 of their salaries should be stopped. And the financial institutions should be making follow-ups so as to ensure diversion of funds is checked, and lastly employee should be educated on the government policies on poverty reduction and the millennium goals.