Effects of credit assessment determinants on credit uptake in the Agriculture financing sector in Kenya: A case of South Imenti Sub-County, Kenya.

Abstract

Food Security is a vital cog in every fiscal and monetary growth of all countries worldwide. It is a state when all people have economic, social and physical access to nutritious, safe and sufficient food that meets food preferences and dietary needs for a healthy and active life at all times. Lack of funding confines farmers’ productivity and improved income hence a major impediment for farmer’s especially small-scale farmers in third world countries. The purpose of the project was to assess the effect of credit assessment determinants during credit uptake. The Specific Objectives was to determine how character, financial capacity, capital contribution, collateral and credit conditions affect credit access to farmers in South Imenti. The study was based on two theories namely prospect and Lewin’s Change Management Theory` which anchored the research study. The design of the study was carried out in South Imenti sub-county within Meru county farmers. Primary data was collected from 336 among the 2,133 in South Imenti farmers (stratified sampling) in Meru County. A questionnaire was the mode of collecting primary data where interviewed farmers were identified by transect in a preselected region whereby after the questionnaire was drafted pilot study was conducted to ensure effective data collection tool was used. The software utilized to analyse the primary data was SPSS (24). Study findings depict that farmers in Imenti South Sub-county are made up of a diverse mixture of all age groups while majority are young and middle aged. Regression model was able to explain 77.9 percent of the success in credit application for Agricultural loans. The study determined that character (β = 0.263; ρ = 0.008), capacity (β = 0.255; ρ = 0.004), contribution (β = 0.601; ρ = 0.000), collateral (β = 0.314; ρ = 0.000) and conditions (β = 0.465; ρ= 0.001) had considerable effect on agricultural credit uptake. Lastly, Study findings demonstrated that agricultural credit uptake was averagely successful (β = 0.352; p = 0.498). Using the standardized coefficients, the study findings revealed that contribution was the most influential on credit uptake success in Imenti south (standardized β = 0.547) followed by conditions ((standardized β = 0.348), collateral / Collateral (standardized β = 0.317), character (standardized β = 0.240) and capacity (standardized β = 0.237) against ranking of 5Cs concluding that Collateral, Capacity, Capital, Character and Conditions should be in that ascending order. The study recommends: - government together with lenders should establish training programs to equip farmers with effective agri-business skills, financial know how and disaster preparedness. National government in collaboration with the county government should enforce better regulations to ensure farmers get maximum benefits from produce like avocado farming. Also they can subsidize farm inputs and improve roads for easier access to the market. Lenders should create more favourable credit offers for farmers. This can be achieved by coming up with better terms like affordable interest rates and longer repayment periods. Alternative securities should be developed like bank guarantees that can ensure that farmers without title deeds are able to benefit with loan funds. Lastly, due to unforeseen happenings, lenders could offer farmers better grace period.