Evaluation of Factors Influencing Access to Credit Financial Services: Evidence from Smallholder Farmers in Eastern Region of Kenya

Abstract

The access to credit financial services by the rural smallholder farmers in many occasions has revolutionized the rural development in a sustainable manner, and has greatly contributed to household food security and poverty reduction. This study sought to establish the main factors that affect smallholder farmers’ access to credit financial services in the Eastern region of Kenya using logistic regression model. The marginal effects results indicated that, education level, main occupation, and group membership were statistically significant with positive effects on access to credit financial services. However, household income was found to be significant with negative effects on access to credit financial services. Overall, this paper concludes with implication for policy to establish credit/loans offices close to farmers in order to reduce lending procedures, risks, and educate them on perceptions on loan repayment. Moreover, the government should enhance the development of local credit and distribution systems as well as enforcement of credit input services in form of in-kind lending to reduce fungibility into consumption expenditures. Finally, there is an urgent need for effective insurance training programs to mitigate the risks in farming, as well as financial literacy programs to familiarize smallholder farmers with the skills required to effectively understand, assess and utilize credit financial services towards enhancing their agricultural activities.

Keywords: Evaluation; Smallholders; Credit Access; Financial Services; Eastern region; Kenya