In Kenya, conservation and sustainable utilization of the environment and natural resources form an integral part of national planning and poverty reduction efforts. However, weak environmental management practices are a major impediment to agricultural productivity growth. This study was motivated by the paucity of literature on the poverty-environment nexus in Kenya, since poverty, agricultural stagnation and environmental degradation are issues of policy interest in the country's development strategy. The paper builds on the few existing studies from Kenya and explores the impact of household, farm and village characteristics as well as the development domain dimensions on household welfare and investment in soil and water conservation. The results show that strengthening the tenure security improves household welfare. Further, soil quality, topography and investments in soil and water conservation affect household welfare. Agroecological potential, which is related to environmental conservation, is also a key correlate of poverty. Results for investment in water and soil conservation confirm the importance of tenure security in determining adoption and also the intensity of SWC investments. We also find that household assets, farm characteristics, presence of village institutions and development domain dimensions are important determinants of adoption and intensity of soil and water conservation investments. The results for both poverty and investment in soil and water conservation suggest the existence of a strong poverty-environment link in our sample. The results also suggest that rural poverty can be alleviated by policies that improve environmental conservation and strengthen land tenure security. The study also underscores the importance of village institutions in both investment adoption of soil and water conservation and in improving household welfare.PREM Working Paper: PREM 06/06
This study looked at the impact of financial inclusion on households’ welfare in Kenya based on both the single (transactionary, credit, savings and investment, insurance and pension) and composite measures (portfolio usage) of financial inclusion. The study used repeated household Financial Access datasets for the period 2009 to 2016 to run five autoregressive distribution models to capture the welfare impact. Estimation results established that the impact of financial inclusion on household welfare varies by product with the credit channel taking the lions share. A shift from non-usage (control) to usage (treatment) of financial services (zero one change) among the sampled respondents raises household welfare by 126, 110 and 49 percent with respect to credit, transactionary and insurance products respectively ceteris paribus. Conversely, a counterfactual assessment revealed a 56, 52 and 33 percent drop in welfare from the non-usage of credit, transactionary and insurance products respectively. Portfolio usage of financial services as captured by the index of financial inclusion raises household welfare by 347 percent other factors held constant. Given the positive welfare impact of financial inclusion, the study recommends increase in the range of formal financial products to increase competition in financial markets lowering transaction costs for welfare improvement. Policies targeting welfare improvement through finance should also be aligned to specific financial inclusion transmission channels to be more effective as opposed to blanket proposals.
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