Determinants of Lending to Farmers by Commercial Banks in Kenya
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Date
2013-11Author
Langat, Robert C
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Kenya is an agriculture based country and there is a lot of interest in the financing
activities in this vital sector. The explanation provided by theory that there is connection
between lending policy and issues like credit standards; assessment of return on credit;
and assessment of risk on credit to farm may not be universal to all sector or countries.
This research was, therefore, designed to find out the determinants of lending to farmers
by commercial banks in Kenya. The study was conducted through a survey using self
administered structured questionnaires delivered to commercial banks in Kenya.
The respondents were required to provide an assessment of their lending policy to
farmers vis-a-vis their policies on Credit Standards with Regard to Farmers; their
Assessment of Return on Credit to Farmers; and their assessment of Risk on Credit to
Farmers. The results indicate that banks give out loans to finance farming activities and
that farmers have reliable sources of income that enable them to pay back their loans in
time. The results show that Credit Standards Credit Standards Regard to Farmers
negatively affected lending to farmers. The research has also found that Return on Credit
to Farmers negatively affected lending policy to farmers. Further, Risk on Credit to
Farmers negatively affected lending to farmers. This indicates that Credit Standards with
Regard to Farmers; Return on Credit to Farmers; and Risk on Credit to Farmers reduces
the amounts provided to the farmers in Kenya. Factors such as the location of the
financial institution, loan size extended to farmers, interest rates charged on credit to
farmers affect lending to farmers by commercial banks.
Based on the findings and the conclusions of this study, it is recommended that policies
should be designed to ensure that the income from farmers in Kenya is stabilized to
mitigate risk and improve their creditworthiness. Policies should also put in place to
ensure that farmers have skills to manage their finances properly to maintain excellent
financial records with banks. Policies should be put in place to help banks relax their
credit qualification for farmers so as to stimulate the demand and supply of credit.
Citation
Master of Business Administration DegreePublisher
University of Nairobi School of Business
Description
A research project presented in partial
fulfillment of the requirements for the award of
Master of Business Administration Degree,
University of Nairobi