The Effect of Financial Literacy on Financial Inclusion Among Small-scale Farmers in Trans Nzoia County

Abstract

The objective of this study was to identify the effect of financial literacy on financial inclusion among small-scale farmers in Trans Nzoia County. The study was informed by Asset Building and Financial Inclusion theory, Behavioral Economics, Capability theory, and Institutional theory. Descriptive research design was adopted. The target population was the small-scale farmers in Trans Nzoia County. The sample size was 384 farmers in Trans Nzoia County, who were picked randomly from the various sub-counties within Trans Nzoia. The study collected primary data through a questionnaire. Prior to data collection, a pilot test was conducted to check for validity and reliability of the instrument. Content validity was checked with the help of the supervisor while reliability was tested through Cronbach’s test. The questionnaires were administered to the small-scale farmers by the researcher. The collected data was cleaned and examined for completeness and comprehensibility, and entered into the SPSS (Version 20) for analysis. The data was analyzed using both inferential and descriptive statistics. Descriptive statistics used included standard deviation, means, and frequencies and percentages. Multiple linear regression model was used for inferential statistics to establish the relationship between variables. The analyzed data was presented using charts, frequency tables, and percentages. The study found out that saving practice, debt management practices financial planning practices and investment practices by small-scale farmers influenced the access and use of financial practices to a great extent. The study concludes that that there was a positive and significant relationship between saving practices, debt management, investment practices, financial planning services and financial inclusion. As a result, they used the financial services to save for future needs. On addition, an increase in debt management practices significantly increases use and access of financial services by small-scale farmers. Knowledge of investment options translates to knowledge on financial services which encourage small-scale farmers to use and access financial services for services such as savings and for loans to advance their investments. The study recommend that the various micro finance institutions and government agencies should organize financial education and awareness programs to small scale farmers on saving practices, debt management, financial planning and investment practices. Financial education should also be incorporated in the school curriculum from primary level so that individuals are financially informed early in life.