Determinants of semi-formal credit participation among rural farm households in Kakamega County, Kenya

Abstract

In recent years, devolved governments in Kenya have been offering semi-formal credit programs to rural households. Despite the key role of this type of credit in enhancing the welfare of rural household welfare, little is known on determinants of rural farm household participation in the credit programs. Therefore, this study sought to identify factors influencing farmers’ participation in the semi-formal credit program in Kakamega county. The study used a multi-stage sampling approach to gather data from 179 respondents. The data collected was analyzed using descriptive statistics and a probit model. The results indicated that the semi-formal credit accessed by rural farm households was allocated to both on-farm and off-farm enterprises. Also, factors that significantly influenced household participation in the semi-formal credit included farming experience, occupation of household head, group membership, distance to credit source, distance to the nearest market, and access to financial training. Based on the study results, policymakers and other stakeholders should offer financial training, thus enhancing farmers’ productivity and promoting their participation in semi-formal credit programs. Also, they need to encourage farmers to join socio-economic groups and engage in sustainable off-farm activities.

Effect of Borrower's Socio-Economic Profile on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region

“…Yin [54] agreed that information on the effect of distance helped farmers in making sound borrowing and investment decisions. Mukwami [59] attributed most of the farm loan penalties to recovery charges caused by friction of distance. Herpfer [60] agreed about the possibility of hampered relationship between the borrower and lender which spoils the opportunity for loan graduation.…”