An Analysis of Credit Use and Expenditure on Agricultural Production - The Case of Maize Farming in Uasin Gishu County of Kenya

Abstract

Kenya’s economy is highly dependent on agriculture with maize production being one of the main agricultural activities. It produces an average of 23 million bags of maize annually with Uasin Gishu County accounting for 14.3% (3.29 million bags) of this national output. Production is associated with increasing cost and this brings to fore the question of financial requirements and expenditure, on agricultural production (Kamau and Otieno, 2013). To understand this puzzle, this study sought to answer the question regarding sources of finance for farmers and their expenditure on maize production.

The study sought to establish the existing relationship between usage of loan facilities and expenditure on the one hand, and maize production on the other. Using exploratory survey design, 144 maize farmers from across the county were sampled and the data collected was analyzed using descriptive and inferential statistics. Descriptive statistics was used to capture the level of maize production, usage of loan facilities and expenditure by the maize farmers. Inferential analysis was used to draw conclusions concerning the relationships and differences found in research results.

The analysis of variance (ANOVA) results showed a very low positive correlation between output and source of finance, credit or non-credit, as given by r = 0.2185. Only 4.77% of output is explained by source of finance (r² = 0.0477). The analysis of covariance (ANCOVA) results showed a high positive correlation between output and the two explanatory variables source of finance (credit or non-credit) and expenditure as given by r = 0.7175. Over fifty-one percent of output is explained by both expenditure and source of finance (credit or non-credit) as given by r² = 0.5148.

In the analysis of variance, the estimated D_i is statistically significant because of the t-value which is 2.6667 and the P-value which is 0.0086. This means that the numerical values of maize output for credit users and non-credit users are statistically different.

Key Word: Credit financing/Non-equity financing, Expenditure, Maize, Production/Yield, Uasin Gishu