Socio-Economic and Institutional Constraints to Accessing Credit among Smallholder Farmers in Nyandarua District, Keny

Abstract

Amongst the challenges faced by smallholder farmers in production is inaccessibility to credit. This s tudy sought to identify household socio-economic and institutional constraints influencing access to credit among sma llholder farmers in Nyandarua District. The study used a Log it model. Both quantitative and qualitative data we re acquired from primary and secondary sources. Primary data wa s collected using questionnaires through a survey d esign. A sample of 164 smallholder farmers was selected usin g stratified, multi-stage random sampling technique s. Data was analyzed using descriptive statistics and maximum l ikelihood method using Statistical Package for Soci al Sciences (SPSS). The study established that socio-economic c onstraints such as age, gender, household size, far m income, collateral and awareness are critical determinants of access to credit. The study also established tha t institutional requirements such as costs involved in operating / maintaining bank accounts, loan requirements and tr ansaction costs involved in the credit process influenced access to credit. The study concludes that household socio-e conomic characteristics and institutional requirements infl uence access to credit. Key recommendations made in clude the need by government to deal with bureaucracies involved i n land registration to benefit majority of smallhol der farmers who remain insecure in the land they use without proof of ownership and also to make easier the registrati on of lease certificates for those who do not own land and use land on leasehold tenure system. Financial institut ions should also put in place less stringent credit requirements and reduce credit costs especially interest rates to m ake credit more affordable.