| dc.description.abstract | Economic growth in Kenya depends on agricultural
prosperity.
With only 18% of the total land area in Kenya
suitable for farming, improvement in productivity will mainly
hinge on improved agricultural techniques.
This requires the
increased use of purchased inputs such as hybrid seeds and
fertilizers.
The majority of the farmers in Kenya, however,
cannot afford purchased production inputs, and they have
little access to credit.
A number of constraints inhibit the
flow of credit to small holders.
These include the colonial
tradition and lack of effective small holder loan programs.
There is, however, one promising type of credit system
based on lending to groups of small holder farmers.
Group
lending responds to such major constraints in small holder
lending as the lack of appropriate collateral to secure loans
and the high institutional cost of small holder lending.
Further, it achieves economies of scale by dealing with
several farmers per loan.
The group lending approach depends on the collective
responsibility of groups for individual loans.
It works in
such a way that one's receiving of loan funds hinges on the
groups's repayment of previous loans.
This maintains an
incentive for loan recipients to repay.
This approach has been tried successfully by Non-
Governmental Organizations, sections of a few government
programs and various informal groups.
These institutions
have been working in widely scattered areas within the
country.
Their impact has therefore been limited by scale
while the informal groups have further been limited by
financial constraints.
For greater impact, it is proposed
that group lending be expanded on a wider scale.
The major strategy proposed for the implementation of
this approach is the use of existing financial institutions,
farmers groups, and other institutions.
This requires
strengthening the operations of the institutions directly
involved in lending and borrowing to make them more effective
in the delivery and utilization of the credit.
The framework within which the institutions work is
critical to the success of this approach.
Credit and
banking policies need to reflect a more balanced picture.
Reorganization is required in the marketing and distribution
of farm inputs to the small scale producers.
Storage
facilities need to be improved to meet the expected increase
in agricultural productivity by the farmers groups.
Complementary services such as extension must be modified to
serve the interest of small holders.
Further research is
needed to understand issues involving small holders such as
saving potential, and the determinants of credit demand. | en |
