The relationship between financial deepening and performance of smallholder farmers in Homa Bay County Kenya
Abstract
Theory and evidence show that financial sector deepening has some positive impact on
performance and widens access to financial services for the SHF. However the subject of
the relationship between financial deepening and performance of SHF has not been fully
explained thus empirical evidence, presents varied positions. This study aimed at
establishing the relationship between financial deepening and performance of SHF in
Homa Bay County, Kenya. The research focused on 2011/2012 & 2012/2013 period
because records for previous periods were not easily accessible. In this research,
performance of SHF was the dependent variable while the independent variables were
various aspects of financial deepening, namely; Farmers Assets, Deposits to
Cooperatives, Share Capital and Loans given to farmers.
The study used the multiple regression model regressing Performance of SHF against
Assets, Deposits, Loans and Share Capital. The analysis was done at 95% confidence
level. The significance of the constant term of the regression and the coefficient of each
of the independent variables was tested using t-tests while the significance of the whole
regression was measured using the F-test. The degree to which the variation in
independent variables explained the variation in GDP growth was measured by the
coefficient of determination. The research established that the performance of farmers
would still grow by 2,155.92 Kes independent of Assets, Loans, Share Capital and
Deposits. However, from the model, SHFs’ average Assets, Loans, Share Capital and
Deposits were not statistically significant in determining performance of SHF.
It was indicated that a 1% rise in Share Capital would result in 1.74% drop in
Performance of SHF if all the other variables remain constant and that increasing
Deposits by 1% would lead to 1.71% drop in Performance of SHF if all other variables
remain constant. It also indicated that 1% rise in Loans would lead to 0.96% rise in
Performance of SHF if all other variables remain constant and that 1% rise in private
credit would drive 1.03% rise in Performance of SHF if all other variables remain
constant. However, coefficient of determination indicated that only 65% of variation in
Smallholder Farmers Performance was well explained by Assets, Loans, Share Capital
and Deposits. It is, therefore, recommended that strategies to enhance financial deepening
be put in place as a mechanism of stimulating performance of SHF in Homa Bay County.
Publisher
University of Nairobi
Description
Thesis