Influence of credit utilization by smallholder farmers on coffee production: a case of karithathi farmers cooperative society in kirinyaga county kenya

Abstract

Credit helps in reducing poverty amongst small-scale farmers, by enabling them to increase agricultural productivity and this leads to improved standards. Ministry of Agriculture and Livestock lacks clear policy on how to deal with the problem of access to credit facilities by smallholder farmers hence leaving farmers to negotiate on their own with financial institutions. The Kenyan government has taken bold steps over the last twenty years, to increase access to affordable financing to smallholder coffee farmers. Increase in coffee production has not been realized despite government commitment to waiving loans owed by smallholder coffee cooperatives societies amounting to Kshs 1.3 Billion and Stabex funds to the tune of Kshs 1.7 Billion. The research study specifically tried to establish the utilization of credit by smallholder coffee farmers and its influence on coffee production in Karithathi Farmers’ Cooperative Society in Kirinyaga County. Objectives of the research study were to: Asses the influence of cash advances utilization on coffee production, establish the influence that credit vouchers utilization have on coffee production and determine the influence of farm inputs credit utilization on coffee production. Descriptive Survey design method was used, there are 2,378 active farmers in Karithathi Farmers Cooperative Society who formed the population of the study, owing to limited resources in form of finances and time that the researcher had, a sample of only 783 farmers of the target population. The study revealed that 61.51% of the farmers utilized their farm inputs on credit mainly fertilizers only in coffee farming while 38.49% of the farmers either diverted part or all farm inputs credit to farming other crops or sold it, the study found a positive relationship to those who utilized farm inputs on coffee and increase in coffee production. The use of farm inputs credit in coffee farming had a strong positive impact in increasing coffee production. The study also revealed that only 76.42% of the farmers had access to credit vouchers which they utilized for paying school fees thus it had no positive impact in increasing coffee production. All respondents in the study 82.64% had access to cash advances while 17.36% had no access to cash advances. Majority of those with access to cash advances 95.89% used it to pay school fees and attend to household needs with only 4.11% using the cash advances for paying labour. This had no impact in increasing coffee production.