Reduction on poverty levels has been driven by growth in key economic sectors such as agriculture, trade, and finance, the Government has said.

In what might be seen as an endorsement of President Kibaki's economic policies, the Kenya Integrated Household Budget survey shows more Kenyans are leading better lives.

The reduction of the overall inflation levels to just six per cent during the period is another factor the survey report says has driven recovery of key sectors of the economy. The survey shows that increased use of the devolved funds such as the CDF, the District Roads Fund, the constituency Aids funds, the Local Authority Transfer Fund and the constituency education bursary fund played a bigger role in reducing poverty levels.

"There are indications that the devolved funds enhance service provision to communities that for many years did not benefit substantially from Government services," the report says.

"There is therefore a great potential for devolved funds to achieve the desired development outcome if funds are efficiently used."

The increase in tax revenues from Sh150 billion to Sh350 billion is being cited as a major issue that has enabled the Government to deliver on its economic recovery strategy.

While the Government's tax revenues grew at a slow pace between 1997 and 2001, the survey says that it almost doubled between 2002 and 2005.

"The increase in tax revenues is also attributed to an expanded tax base and increased efficiency in the tax collection system," Planning and National Development minister, Mr Henry Obwocha, has said.

The survey found out that in the finance sector, commercial bank interest rates on loans and advances dropped from 30.4 per cent per annum in 1997 to 13.2 percent in 2005.

"Reduced bank interest rates and increased lending from the financial sector has enabled farmers, traders and other players in rural areas to access credit more affordably, thereby spurring economic growth through increased entrepreneurial activities," the report notes.

Backed by economic growth of close to 5.8 per cent so far, the survey says that more people have delved into agriculture as a commercial undertaking, with 90 per cent of the farmers interviewed saying they grow maize. This is driven by the high prices being paid by the national cereals and produce board.

As a result, the survey says that maize takes 48 per cent of the cropped area as farmers try to capitalise on the high prices paid by the Government agency.

The survey found out that three million people have diversified their sources of income. Most were supplementing their regular salaries with other sources such as rental income.

And while the survey says that the national average income is about Sh17,000, rental of property accounted for 41 per cent of the extra income streams that are enjoyed by citizens. And despite recent rush by commercial banks, the survey says that many are still skeptical about the need to source for funding from finance houses.

It says that on 3.9 per cent of those interviewed access credit through banks, while majority, who account for 45.6 per cent, prefer borrowing from their neighbours.

And despite being worth Sh180 billion, the Co-operative movement is yet to excite Kenyans because only 11.9 per cent access their credit through Sacco societies.

Despite that, the survey found out that 13.3 per cent of North Eastern Province residents were accessing their loans through banks, probably driven by their traditional involvement in transport and miraa (khat) export business. They are followed by the farming community in Central Kenya at 7.4 per cent.

The survey found out that close to 39 per cent of those interviews borrow to fund their subsistence needs, while 22 per cent of those interviewed say they borrow to fund education.

The survey found out that some 68.3 per cent of households are still using firewood as their main source of cooking energy. This shows that attempts to lower taxes on LPG in an effort to encourage users to shift to cooking gas are yet to bear fruit.