More money for less work – or more work for less money? : Microfinance in the context of poverty and extreme working hours in the Kenyan informal economy

Abstract: The Sub-Saharan African informal economy is often characterised by underemployment where workers spend countless hours earning bare minimum. This study investigates the impact of microfinance participation on earnings, time spent on market work, household work and leisure among women in the informal economy in Kenya. The findings are that microfinance on average increases earnings and reduces working hours due to a negatively sloping labour supply curve. This can be interpreted as an increase in productivity. As working hours are reduced, it is argued that time spent on the two other activities increase proportionally. If household work and leisure can be interpreted as activities with positive marginal utility, then these changes can be seen as income effects.