Influence Of Socio-Economic Factors On The Uptake Of Agricultural Credit By Maize Farmers In Kwanza Sub-County, Kenya

Abstract

Agricultural loans if well utilized can boost maize productivity in farms and overall food security in the country. Despite commercial banks and other financial institutions established with the principle service of offering loans, access to agricultural loans to many maize farmers in Kenya is still limited. This study sought to investigate influence of socio-economic factors on uptake of agricultural loans by maize farmers in Kwanza Sub-County, Trans-Nzoia County. Specifically, the study determined how farmers‟ income, loaning policy, loan experience and land ownership rights influenced uptake of agricultural loans by Maize Farmers. This Study was anchored on Signaling Theory. Descriptive survey design was adopted for this study. The target population were 5 crop extension officers, 10 credit managers and 14631 maize farmers spread across all the 4 wards making up Kwanza sub-county. A sample of 384 maize farmers was considered. Stratified sampling method was used to collect various characteristics of farmers in the four wards and systematic sampling was used to refine the sampling frame. The researcher used questionnaires and interviews to collect data. Data was collected by administering questionnaires to maize farmers and holding face-face interviews with Credit managers and Crop Extension Officers. Qualitative data collected was analyzed using thematic analysis method. Quantitative data was analyzed using SPSS where descriptive statistics inform of frequencies and percentages was presented in tables. Quantitative data was also analyzed using inferential statistics where linear regression was used as a statistical tool to establish the association between variables at 0.05 level of confidence. In the findings, Loan experience and awareness had a great influence on uptake of agricultural loans compared to farmers‟ income, loaning policy and land ownership rights. Loaning policy, farmers‟ income and land ownership rights influenced uptake of agricultural loans in that order and this was determined by the beta coefficients (strength of correlation) between the independent and independent variable. Notably, 80.2% of the respondents observed that they would never apply for financial credit in the future because of the bad experience they had. Further, 70.6% maize farmers observed that they were auctioned by financial institutions for failing to repay their loans in full, they were discouraged to secure loans in future. The majority, 98.9% indicated that interest rates charged on loans made them to shy away from securing financial credit. In another case, 97.2% supported the fact that banks attached hidden charges on loans hence making maize farmers to shy away from securing financial credit. Regarding income, 65.4% of maize farmers did not have an alternative economic activity that generated more income, they relied only on maize farming. In the findings 61.2% respondents stated that they practiced maize farming in a family land, family lands were hardly used as use a collateral to secure financial credit. It was recommended that financial institutions should create awareness to maize farmers to enable them make informed decision before securing loans. the government should review the interest cap act to allow market forces of demand and supply to determine interest rates. Central banks should monitor the practices of commercial banks to prevent restrictive policies on maize farmers. The government should give title deeds and register all farmers to allow them secure loans easily from banks.