| dc.description.abstract | In Kenya, financial inclusion has become key in development policy with the belief that access
to financial services is a powerful means of reducing poverty. About 32% of the population is
excluded from access to financial services with the situation being worse in the rural areas. With
the introduction of mobile phone based money transfer services and agent banking models of
financial intermediation, there is now a wider choice from the financial provision modes (FPM)
that existed before. Agent banking model is an ICT enabled model where formal banks provide
financial services through non-bank agents, such as grocery stores, retail outlets, post offices,
pharmacies, or lottery outlets. It allows banks to expand services into areas where they do not
have sufficient incentive or capacity to establish a formal branch, which is particularly true in
rural and poor areas. Access to financial services has been argued to raise both technical and
allocative efficiency in agricultural sector since farmers can adopt more capital-intensive
methods of production in addition to allowing farmers to substitute non-market inputs with
market inputs therefore increasing a farmer’s ability to bear risk. This study examined use of
agent banking and its effect on agricultural performance of small scale farmers. The analysis was
done using different regression models. Descriptive analysis was used to characterize users of
different FPMs, Multinomial logistic model was used to analyse factors that influence use of
different FPMs while a profit function was estimated jointly with fertilizer share equation using
Seemingly Unrelated Regression (SUR) for comparison of efficiency among households using
different FPMs. The study used data collected from 186 households in Nyandarua County
through face to face interview using pretested questionnaires. The dominant FPMs included
mobile phone based money transfer services (MMT) (41%), agency banking (40%),
convectional banking (14%), rotating savings and credit associations (ROSCAS) (3%), and
microfinance institutions (1%). The descriptive results show that there is a significant difference in age, proximity the FPM, access to extension and level of education between users of different FPMs. Multinomial logistic regression results show that gender, age, years of active participation in group activities, access to extension, income, distance to the bank agent outlet and cost of accessing the nearest convectional bank influences choice of a specific FPM. Analysis of variance (ANOVA) results show that households using agent banking services make higher profits in crop enterprises than households using other FPMs. SUR results show that the relative degree of efficiency of households using agent banking is similar to that of households using convectional banking but agent bank users are more efficient than MMT services users. In production elasticity estimation, land and capital (pesticides, herbicides, and machinery) were the most limiting factors of production. The implication of the findings is that access to formal financial services to the rural areas enhances agricultural performance of small scale farmers. In addition to improving access to government and other development agencies projects like youth and women development fund to the rural populace, sensitization and training to the rural agricultural population should be biased towards investing in land and capital productivity enhancing modern technology. | en_US |
