EFFECT ON ACCESS TO CREDIT AMONG SMALLHOLDER FARMERS IN MANYATTA SUB-COUNTY, EMBU.

OPIYO ROSE ATIENO

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENT FOR THE AWARD OF THE DEGREE IN BACHELOR

OF SCIENCE AGRIBUSINESS MANAGEMENT. UNIVERSITY OF EMBU.

DECLARATION

I declare that this research project is my original work and has not been submitted for a degree award in any of the university.

SIGNATURE……………………………            DATE…………………………….

OPIYO ROSE ATIENO

A101/12704/2016

SUPERVISOR APPROVAL

This research project is submitted for examination purpose with my approval as the University supervisor.

SIGNATURE……………………………………..DATE……………………………..

DR HEZRON ISABOKE

AGRICULTURAL ECONOMICS AND EXTENSION

UNIVERSITY OF EMBU

DEDICATION

I dedicate this project to my family for their support especially financially, to my friends, Jeremiah, Josephat and Caroline, who helped a lot and their entire Agribusiness class.

ACKNOWLEDGEMENT

My humble gratitude is to Almighty Gog for His strength and seeing me through this project. My sincere appreciation is to my supervisor Dr Hezron Isaboke for his professional guidance and help during the phases of my project. Also, my lectures of their support during my various stages of the project. I am grateful for the University of Embu for allowing me to pursue my degree in Bachelor of Agribusiness Management; I won’t forget my classmates who supported me until

Table of Contents

DECLARATION.. 2

DEDICATION.. 3

ACKNOWLEDGEMENT.. 4

LIST OF TABLES. 5

ABBREVIATIONS AND ACRONYMS. 6

ABSTRACT.. 7

CHAPTER ONE.. 8

INTRODUCTION.. 8

Background Information. 8

1.2. STATEMENT OF THE PROBLEM… 10

1.3. OBJECTIVES. 10

1.4. RESEARCH QUESTIONS. 10

1.5. JUSTIFICATION.. 11

1.6. SCOPE OF STUDY.. 11

CHAPTER 2: LITERATURE REVIEW… 12

INTRODUCTION.. 12

CREDIT ACCESSIBILITY.. 12

2.1.1. INFLUENCE OF COLLATERAL ON CREDIT ACCESSIBILITY.. 12

2.1.2. INFLUENCE OF LEVEL OF EDUCATION ON CREDIT ACCESSIBILITY.. 13

2.1.3. INFLUENCE OF GENDER ON CREDIT ACCESSIBILITY.. 13

2.1.4 INFLUENCE OF NUMBER OF INSTITUTIONS ON CREDIT ACCESSIBILITY. 14

2.1.5 INFLUENCE ON THE RISK RELATED FACTORS IN ACCESS TO CREDIT.. 14

THEORETICAL FRAMEWORK.. 15

THE PECKING ORDER THEORY.. 15

DEMAND AND SUPPLY THEORY.. 15

CONCEPTUAL FRAMEWORK. 16

CHAPTER 3: RESEARCH METHODOLOGY.. 17

3.1. INTRODUCTION.. 17

3.2. RESEARCH DESIGN.. 17

3.3. TARGETED POPULATION.. 17

3.4. SAMPLING DESIGN AND SAMPLE SIZE.. 17

3.4. STUDY AREA.. 18

Data collection instrument 18

Data collection procedure. 18

Data processing and analysis. 18

Pre-test instrument 19

CHAPTER FOUR RESULTS AND DISCUSSION.. 20

4.1. Introduction. 20

4.2. Demographic information. 20

4.3 Distribution of respondent by age in years. 21

4.5. Distribution of respondent by the level of education. 21

4.6. Credit accessibility. 21

4.7. Sources of finance. 21

Collateral and credit 23

Literacy level and credit accessibility. 24

Number of financial institutions. 26

Firm discrimination. 27

Gender. 28

Regression analysis. 29

Coefficient 29

CHAPTER 5 SUMMARY, CONCLUSION AND RECOMMENDATION.. 31

Summary of the major findings. 31

Conclusion of study. 32

RECOMMENDATION.. 32

SUGGESTION FOR FURTHER STUDY RESEARCH.. 33

REFERENCE.. 34

RESEARCH QUESTIONS. 37

LIST OF TABLES

Table 4:1……………………………………………distribution of demographic respondent

Tables 4:2……………………………………………Descriptive of the effect of access to credit

Table 4:3……………………………………….……Collateral and accessibility

Table 4:4………………………………………..…….Literacy level

Table 4:5………………………..……………………Number of financial institutions

Table 4:6…………………….……………………….Firm discrimination

Table 4:7……………………….……………………Gender

Table 4:8…………………………………………….Model summary

ABBREVIATIONS AND ACRONYMS

GDP……………………………………………..Gross Domestic Product

NGOs…………………………………………….Non-governmental Organizations

SACCOS………………………………………….Savings and Credit Cooperative Society

GoK…………………………………………………Government of Kenya

IFC…………………………………………………International Finance Cooperation

MDG………………………………………………    Millennium Development Goal

ABSTRACT

The purpose of this study is to create the issues affecting credit accessibility among smallholder farmers in Manyatta sub-county Embu. The study is to be measured through collaterals, literacy level, gender, related risk and number of financial institutions. It also relays on pecking theory and demand and supply theory. The approach to be used in the research will be descriptive research. The independent and dependent variables test will be done via regression statistics. The population will be the smallholder farmers in Manyatta, Embu County. The estimated sample size is 400 respondent, but 50 respondent will be used. A questionnaire will be used as a primary instrument for collecting data.

The study found out that both collateral and literacy level had a negative relationship toward credit accessibility. The study showed that farmers experience challenges in accessing credit, lack of collaterals, low literacy level, firm discrimination, less number of financial institutions and gender, most men own land compared to women, the bank prefers lending to men than woman.

The study only focuses on these factors to access credit, and it is recommended that other studies be done to determine other factors that affect access to credit.

CHAPTER ONE

INTRODUCTION

Background Information

Moving possessions from those who own it to individuals who wish to use it are the principle function of credit that is, give a loan by banks to individuals who design to pledge or develop a business venture. The transfer is for the time being and is made for the price, this is recognized as interest, which differs with the risk involved and by the demand for supply or credit. Distance to credit sources, income level previous security membership and assets possessed are essential variables to explain the participation in formal credit markets. Homestead is more likely to favour the informal sector to the legal sector concerning flexibility in rearranging loan payment in periods of unpredicted income shocks (Hussein 2007).

Farming is reflected as a severe development device globally in the success of the first Millennium Development Goal (MDGs), that aims at having the number of individuals suffering from new poverty and starvation by 2015(United Nation,2006, World Bank,2008). As much as agriculture offers a chance to motivate growth in the economy area, boost food security and in due course decrease poverty in Africa, it has been deteriorating due to issues like; war, famine, lack of awareness on agricultural resources management, inadequate farmhouse space, climate change, funding floods and global warming. (World Bank, 2013).

In Kenya, the agricultural area is significant in terms of work created, but it gives less than its proportional share GDP. This is communal in emerging countries (Adam et al., 2010). In developing counties, agriculture credit is a vital section.

The government of Kenya appreciates the encounters of developing a policy structure that will improve agriculture production through growth and commercialization of the agricultural sector in several of its development strategies that is vision 2030(RoK 2008). In other developed countries, agriculture funding is given higher significance. The world Bank through its private financing arm International Finance Corporation (IFC) among other banks also help agricultural credit (World Bank 2013) formal finance is essential if they are to produce a merchantable surplus and thus add to the development process (World Bank, 2008). Among others, the main limiting factor to smallholder farmers as the Kenyan government has recognized through Vision 2030and, therefore, a low level of commercialization.

Report from the Central bank of Kenya illustrates that agriculture is the most underfinanced area, getting only an average of 3.3% of the entire credit (RoK, 2012). This is far-off below Maputo affirmation of ensuring up to 10% of the country’s yearly budget distributed to the agricultural sector. The manner of financing the agriculture inputs then need liquid cash that mostly is not readily accessible with the smallholder farmers.

One essential way to raise productivity is improving access to credit to assist farmers in helping them have the funds for technology and other inputs for production. Shortage of access to credit is also caused by the lack of ability of formal institutions to lend the smallholder farmers which is gotten due to lack of collaterals and valued assets, and there is insufficient law to quicken up the liquidation of assets for the advantage of the lender when borrowers’ failure to pay.

Improving access to credit services will allow farmers to have the funds for the necessary inputs and hire technology. Given that a big part of Embu’s population is involved in agriculture, it would be useful to identify innovated and appropriate strategies for improving access to credit. Rural financial services accessibility by farmers will bring a difference that is, food security and poverty eradication.

1.2. STATEMENT OF THE PROBLEM

The greater part of Kenya’s population is living in the rural area, and 80% of the farmers are doing farming, despite this, there is a slight effort by the commercial bank and other financial institutes to support credit. Lack of access to credit services has stressed a pivotal limitation to many farmers in Manyatta to capitalize. The demand is high for the loan. The spending includes the acquisition of farm inputs, top-dressing, reinvesting, and manual labour and irrigation. Majority of the farmers find it challenging to meet these needs caused by lack of financial potentials. Access to credit by farmers is essential to cumulative production. In respect to this, to farmers who are of “cash” bases, bought seasonal inputs and necessary labour are mostly not obtainable. Many face liquidity limitations that compromise the essential asset in agriculture. The study will fill this gap by establishing how lack of collaterals, low income, and education level deters farmers from accessing credit.

1.3. OBJECTIVES

General objective– Effect on access to credit among smallholder farmers in Manyatta, Embu.

Specific objectives;

To determine the factors affecting access to credit among smallholder farmers in Manyatta, Embu.

1.4. RESEARCH QUESTIONS

How does lack of access to credit affect smallholder farmers in Manyatta, Embu County?

1.5. JUSTIFICATION

This study will offer useful data on the state of farmers in access credit for commercial banks and other financial institutes. The information will be necessary for lawmakers in taking suitable act towards assisting to the establishing of complete and supportable credit products for the expansion of agriculture production in Embu. The study outcomes will also help develop associates in civil society organization involved in the establishment of credit facilities to farmers in amending the loaning procedures and circumstance to serve better the exact credit wants of their customers. Overall, it is expected that the end finding of this study will deliver a push to discover the opportunity of providing credit facilities that openly supports farmers to rise production

1.6. SCOPE OF THE STUDY

The study will be conducted in Embu County, and it will confine itself to the influences of credit accessibility among smallholder farmers in Manyatta sub-county, Embu County, Kenya. This study will limit its finding from the responses from smallholder farmers in Manyatta. Therefore other extraneous variables beyond the researcher’s control like respondent “dishonesty “will not be so controlled by the researcher. The study is limited to responses attaining from 50 farmers who will be interviewed.

CHAPTER 2: LITERATURE REVIEW

INTRODUCTION

This chapter analyses the literature on the pat study that had been shown by various scholars on credit accessibility. It will begin by talking over the credit accessibility then the influence of collaterals on access to credit affect smallholder farmers, how education level affect credit accessibility on smallholder farmers, how the level of income affects access to credit among smallholder farmers. The chapter will similarly discuss the theoretical empirical as well as the conceptual framework.

 CREDIT ACCESSIBILITY

It speaks of the likelihood of how a single person or an enterprise can access financial services comprising credit, deposit, insurance, disbursement and other managing services (GoK, 2013). Farming credit access is not only in cash but also can be in input supply because it is the productive assets given to farmers with a forthcoming refund and frequently settled at the end of the production set. Credit is vital since it formulates sources of revolution and renovation. Nevertheless equipment needs high investment that smallholder farmers are not capable to a source, this makes most farmers use traditional systems is becoming a great experiment to the farmer in gain access to credit for investment (FAO, 2015). Studies such as ASRES ET AL; (2014) has projected that credit has a helpful effect in decreasing incompetence through the improvement of capital limitation and allow farmers to get input in time. Enlightening access to credit among farmers’ would-be source of poverty suppression amongst farmers (Gideon ETD; 2016)

2.1.1. INFLUENCE OF COLLATERAL ON CREDIT ACCESSIBILITY

Collaterals are the extent to which debtors dedicate possessions to a creditor as security for debt payment Gtman, (2003). McMahon (2005) says that other factor held constant, a firm with other intangible assets need to borrow less compared to the firm with fewer tangible assets due to collateral issue.

Right to access financial credit for smallholder farmers has remained an issue. Zim trade (2011) and is frequently raised by several studies as one of the major limitations to trade and industry growth. Lack of access to credit by smallholder farmers is the incapability to pledgee adequate collaterals. As per them, the present system of land possession and transmission principles delay and prolong limits access to formal credit. Due to lack of perfect title to the functional land in Kenya and where the title is clear, transmission regulations unnecessarily delay the completion of secured loan and therefore access to borrowed capital. Majority of smallholder farmers do not have touchable possessions that they can be used to protect their investments, and thus borrowing is restricted.

2.1.2. INFLUENCE OF LEVEL OF EDUCATION ON CREDIT ACCESSIBILITY

This states that a person can comprehend precisely how money work-how it is gotten, achieved and capitalized. It is significant to ensure a farmer has awareness on how to cope with an initiative; as a result, they can supervise its development (Andoli and Nunoo, 2011) this aids them to create choices on what time to borrow and at what charge. Facts on ease of use of loans are usually conversed over and done with newspaper where the well level of reading ability is obligatory to read and understand (Mwongera,2014) education level impacts positively on the development of businesses.

Easy facts among smallholder farmers are vital for both farmers and the benefactors of the monetary services, a lesser level of literacy creates them not to search into the venture, this is for the reason that they have difficulties in delivering the message to the others and particularly the benefactors of financial services (Mutai,2015). Bestowing to ILO (2009) a high number of businesspersons have insufficient knowledge as most are dropouts after primary level or have attained primary level. The circumstance was shown at Cole et al. (2009) investigational work in India and Indonesia that discovers monetary literacy as a reliable forecaster of demand for financial services. However, this forecaster result of literacy level on access to credit among smallholder farmers in Kenya is until now to be tested particularly in Manyatta sub-county.

2.1.3. INFLUENCE OF GENDER ON CREDIT ACCESSIBILITY

Traditionally it has been viewed that the male is more involved in business ownership and woman left to be a silent partner. Female total entrepreneurial activity index shows that a particular rate for men lend to be on average 50% higher than those for women (Minniti, 2005)

The study by Cole and Mehran (2009) on the relationship between gender difference in the ownership of the firm and the accessibility of credit designates that, woman-owned firms are significantly more possible to be credit constrained because they are more likely to be discouraged from requesting for credit. However, Beck and Cull (2014) observe that female-managed firms in Sub-Saharan Africa.

According to a study done by Mansor and Mat (2010), on it was revealed that in Malaysia women face a challenge in finance accessing because they are perceived to be risky borrowers due to lack of adequate collateral.

2.1.4 INFLUENCE OF NUMBER OF INSTITUTIONS ON CREDIT ACCESSIBILITY.

There is an influence on the total of monetary institutes offering credit in an economy. An insufficient number of institutes to give credit to smallholder farmers limits growth of productions, school 2006. Demand becomes higher than the supply, as soon as the number of smallholder farmers is many then services given to them are few because the financial institutes are few. The charge of the loan will be too much, therefore, not within their means and consequently, low uptake by the smallholder farmers.

2.1.5 INFLUENCE ON THE RISK RELATED FACTORS IN ACCESS TO CREDIT

Farming is regarded as the riskiest investment, and the commercial banks avoid it; this is to decrease transactions costs on loan and increase in profit. (Bankakademie Micro Banking Center, 2005). Yehuala (2008) saw the farmer’s involvement in credit usage from institutes has an essential part in gaining access to credit. An example is the People’s Bank of Zanzibar, it is owned and controlled by the Revolutionary Government of the place, it does not give credit to fishers and farmers but most to the government departments, commercial sectors and parastatals are where the mostly offer loans. So smallholder farmers are not recognized by the lending institutions because they do not have those businesses that are known by the institutes. So the financial institutions tend to offer loans for those who have lower risks and better security.

THEORETICAL FRAMEWORK

THE PECKING ORDER THEORY

This theory was originated by Donaldson I 1961. It went through adjustment that was prepared by Myers and Majluf (1984). Myers says firms select use of in-house funds than out-house funds and new balance funding at lower interest rates as different to new equity financing (Marry and Goyal, 2005). The theory suggests most farmer’s first choice on the home of finance is the inside source which is individual saving. The other one is a preferred debt which is followed by internal equity and outside equity. In Pecking Order Theory, it puts down extra power on the use of internally produced funds instead of those raised by the external means this is more appropriate to smallholder farmers, individuals that use external sources of funds are frequently those with lower profits. The Pecking Order Theory suggests that given the significance of reserved funds that newer firms will have less time to accrue assets and so will want to borrow more than older firms.

DEMAND AND SUPPLY THEORY

This theory was raised as an essential principle of microeconomics by a French economist Walras (1834-1910) the theory studies the link between the demand of goods or services and prices which tests buying decisions of consumer and following the impact of prices on-demand commodity. Once there is an increase in the cost of a product, the amount consumed of the commodity decreases and vice versa while other factors held constant (Saleemi,2000; Mudida,2003). Best of socio-economic factors shows a part in determining the request for a commodity by an individual—one of the product being a credit, to advance the wellbeing of the less fortunate in their micro-economic activities.

Once the cost of credit increases the marginal utility for every shilling raised from the credit goes down. The farmers are left with no option than to consume or use less credit (David 2001). The utility is the ability of a commodity to satisfy the corresponding user (Lisper et al. <1987). For instant; if credit borrowed pleased the business need of a farmer, the credit has utility. The farmer’s revenue affects the quantity it buys of a commodity. If there is a rise in income, the farmer buys additional, this relates to essential goods such as credit borrowing to investment the firm activities, and it is not appropriate to inferior products.

CONCEPTUAL FRAMEWORK.

Figure 2:1; conceptual framework

Independent variable                                                                      dependent variable

CHAPTER 3: RESEARCH METHODOLOGY

3.1. INTRODUCTION

This section emphasis on the methodology that was used when doing the study; it was concluded that the population of the sampling method, along with data gathering and examine methods, was to be used.

3.2. RESEARCH DESIGN

This is the arrangement, summary or design that was to be used to generate responses to study difficulties Orodho (2008) the investigation was to take on descriptive survey design, for the reason that the review agrees to a gathering of data from the good-sized population. Creswell (2008) identified that the descriptive technique or study was to collect information about the current prevailing state of affairs. The research design was selected for the reason that it was not expensive to manage and did not need a lot of them.

3.3. TARGETED POPULATION

The targeted population was farmers in Manyatta sub-county, Embu. The total population was of 177,159 persons as per KPHC 2019.

3.4. SAMPLING DESIGN AND SAMPLE SIZE

As of the total targeted population, 50 farmers remain to be selected randomly by using simple random sampling technique that offers element improve choice that was equally giving the following formula. Yamane (1967:886) will be used to determine sample size

n= N/1+N (e) ²

n= sample size

N= population size

e = acceptable sampling error which is 5% (.05)

The estimated sample size was 400 respondents, and 50 respondents were to be used due to time factor.

3.4. STUDY AREA

In Manyatta, Embu county this was where the study was to take place, it lies approximately within the latitude of 0⁰ 8¹ and 0⁰ 35¹ south and longitude 37⁰ 19¹ East. The total area was 432 KM². It borders with Mt Kenya forest to the north, Mbeere-South and to the east and south-east. Runyenjes to the south. It has Gaturi southward, Mbeti northward, Kirimari ward, Ngando ward, Nginda ward and Ruguru ward. The long rains are between March and June while the short rains are in October. The major economic activity was agriculture; some of the farmers grow tea, coffee, cereal horticultural crops and also macadamia.

Data collection instrument

The tool that was used to gather information was the questionnaire. The questionnaire had equally open and close-ended queries to seek out information. Research questions were also used in the ground reflection to fill in the information gaps. The close-ended questions were used to test the rating of various responses attributes. Open-ended questions were used to provide data that was not captured in close-ended quizzes.

Data collection procedure

Questionnaires with straight forward instructions and easy to comprehend were provided to the section of the people by the researcher. Observation was made by the researcher while travelling to the study area, to fill the information gaps. By the use of view, the researcher acquired first-hand information. The primary data was obtained from administering questions.

Data processing and analysis

Descriptive method was used to look at data using frequency distribution to measure and link outcomes. Data was obtained using one-hundredth tables to get a statistical breakdown of the data. The percentage was used to consider sector A of the questionnaire which involved the demographic info of the respondent. To access the contributing factor of access to credit that was in section B, regression analysis was used;

Y= dependent variable

a= is a constant

b_1, b_2, b₃= coefficient for defendant variable

X_1, X_2, X₃= Independent variable (collaterals, literacy level, gender)

The breakdown was conducted to access factors affecting credit among smallholder farmers in Manyatta sub-county.

Pre-test instrument

These are tools used to time out the strength of the study. Weeks earlier, a review was to lead ten questionnaires to different farmers. The data collected was not to be used in the study; however, was to be used for testing. The farmers were to answer the questionnaire, and the researcher was to make it clear where needed. This was to help the researcher to be more dependable and more objective.

CHAPTER FOUR RESULTS AND DISCUSSION

4.1. Introduction

This chapter delivers a summary of the results, findings, analysis, interpretation and presentation concerning the objective of the study. The targeted sample size was 50 respondent which were the small scale farmers. The respondent was interviewed, that is, they filled the questionnaire and returned making the respondent rate 100%, from Mugenda & Muganda (1999) statement that a response rate of 50% is adequate for analysis and reporting, a rate of 60% is reasonable, and response rate of 70% and above is excellent. The results were presented as follows

4.2. Demographic information

The over-all info of the respondent was considered in the study. This helped the researcher to have an idea and know if he or she has chosen the appropriate respondent of the study. The researcher was interested in gender, age and level of education.

Table 4.1 respondent distribution.

4.3 Respondent distribution on age in years.

Farmers in the middle of the ages of 25-35 years were 40% of the total respondent, 36-45 years were 28% those between 46-55 years were 16% those below 25 years were 10%, and those above 55 tears were 6%. The study shows that the utmost of the smallholder farmers in Manyatta Sub County is between the ages of 25-35 years.

4.4. Distribution of respondent by gender

The tables show the result of gender from the total respondent, 64% of the total respondent stood out to be male, and 36% of the total respondent were female. The study area is in a rural setup, and it is believed that male is to be more active in the farm, and the female is known to do the households. This explains why there is more male respondent than female, and when the researcher was approaching the female gender, she was directed to the male. The females that were interviewed; most of them were either a single parent or a widow.

4.5. Distribution of respondent by the level of education

In the analysis, the highest level of education the outcome showed to be 44% of the total respondent who had reached primary school, 34% of the total respondent had reached secondary school and 27% of the total respondent had reached tertiary education.

The study wanted to know the factors that affect credit, and so these findings were made;

4.6. Credit accessibility

The study wanted to know how accessible the credits are. The results were, 28% of the respondent said that loans from financial institutions were very effective, and the same percentage of respondents ascertained that loans were effective. 28% of the respondent said it was moderate, while 36% of the total respondent said it was slightly.

4.7. Sources of finance

The study ascertained to create the major sources of financing of smallholder farmers in Manyatta. The findings were as shown in the table the results show that 72% of the respondent depends on the financial institutions, 12% depends on the respondent depends on savings, 10% of the respondent depends on chamas whereas 6% depends on borrowing from friends and relatives.

Loan application

Further, the study required to establish, if the respondent had ever applied for a loan, the outcome was most said that they have ever asked for the loan which was 82% of the total respondent and 18% said that they have never applied for loans. As the information on sources of finance, it had shown a more significant percentage depend on financial institutions for credit on their farms.

The study wanted to learn if, for those that applied and were given loan, were their improvement in the farms. The result showed 94% or the respondent improved the performance of their farms, and the rest 6% did not benefit from the loan. This means that the credit offered has a positive impact on improving the farms in Manyatta.

Table 4.2.

Collateral and credit

Based on the scale of 1-5 where (1) meant strongly disagree (2) disagree (3) neutral (4) agree and (5) strongly agree the respondent stood out to say the respondent level on collaterals about credit accessibility. The results were 62% strongly agreed that on numerous case they applied for credit to improve their farms but did not get because they did not have collaterals security, 24% agreed that they asked and did not get credit due to collateral 10% were neutral to the statement 2% of the smallholder farmers agreed, and 2% of the totals respondent strongly agreed to the report.

On the report of the conditions that they deliver security for their loan have added up for them to such for other alternatives to fund my farm, 90% of the respondent strongly agree, 6% of the respondent agree to the statement, 2% of the respondent remained to be neutral, 2% of the respondent disagreed to the account.

The other statement on the times they applied for loans as groups/chamas because they can easily co-guarantee each other, the outcomes demonstrates that 84% of the respondent strongly agree with the statement, 8% of the respondent agreed to the respondent 6% remained to be neutral to the report 2% disagreed that they apply as a group to get credit because it is easy to co-guarantee each other.

The statement on financial institution insisting on the establishment of collateral security as a primary loaning condition, the result shows that 86% of the respondent strongly agree to the statement that collateral security is a primary lending state, 8% of the respondent agreed as the 6% of the respondent were neutral to the statement.

Moreover, on the statement of analysis the likelihood of loan repayment, it is said that monetary institution approves a risk opposed stance to small farms instead of concentrating on revenue-producing likely of an entity. The result showed 82% of the respondent strongly agree to the statement, eight %of the respondent agree to the statement, 10% of the respondent were neutral to the statement.

Table 4.3. Collateral and accessibility

Percentage distribution on response

Literacy level and credit accessibility.

On determining how the level of education affects credit accessibility, 62% strongly agreed that they do not recognize of the lawful matters that are needed to report accessing credit for their farms because the condition of law and regulations are very complex, 8% of the total respondent agreed to the statement that the lack knowledge on the legal issues, 4% of the respondent were neutral to the statement, 12% of the respondent disagreed to the statement that they lack the knowledge and 14% of the total respondent strongly opposed to the statement that they lack experience and that accessing credit is complex. On wanting to know if education level provides them with knowledge and skills that are needed to be more effective in managing farms. The result shows, 52% strongly disagreed to the statement, 36% of the respondent disagreed to the statement while 12% of the respondent were neutral. About 72% of the respondent strongly disagreed their academic qualifications helps them in making financial decisions for their farm; 10 % of the total respondent disagreed to the statement. The respondent that were neutral, that agreed, and those that strongly agreed to the statement were 6%. Whereas, 10% of the respondent strongly disagreed to the statement that, they are dejected from getting loans since the info on accessibility and charges are not communicated in linguistic they can take, 6% of the respondents disagreed, 8% of the total respondent were neutral to the statement, 58% of the total respondent agreed that the language used they cannot interpret.

Table 4.4. Literacy level

Number of financial institutions

The study wanted to establish how the availability of financial institutions affects credit accessibility.14% of the respondent said that in Manyata there are less than 3 financial institutions, 78% of the respondent said that, financial institutions in Manyatta area was between 3-6, and 8% of the respondent stated that the financial institutions were above 6. The study also shows the presence of financial institutions in our area has enabled them mobilize savings which have resulted to more capital injection in the firm, 4% of the respondent strongly disagree as well as 4% disagrees to the statement, 8% are neutral to the statement, 22% of the respondent agrees to the statement whereas 62% of the statement strongly concurs with the statement.

The respondent had a different thought on the statement that, access to financial institutions has improved credit accessibility to most of the smallholder farmers leading to production growth. 4% of the respondent strongly disagreed while 6% of the respondent disagreed to the statement 12% of the respondent were neutral, and 20% of the respondent agreed to the statement whereas 58% of the respondent strongly agreed.

To establish if most of the farmers, through monetary institutes have grasped an operational way to intergrade access to financial services the study found, 10% of the respondent disagreed to the statement. The same percentage of 10% were neutral as 20% of the respondent agreed to the statement, and 60% of the respondent strongly agreed to the statement.

Table 4.5. Number of financial institution

Firm discrimination

In Manyatta, the study found out that smallholder farmers experience discrimination because they have small firms. 94% of the respondent said yes, and 6% of the respondent said no to the statement.  The study showed that the repayment interest is sometimes high making it hard to repay 4% of the respondent noted that hey strongly disagreed as well as 4% opposed to the statement, 6% of the respondent said that they were neutral and 86% of the respondent strongly agreed to the statement.

Also, on the issue of the agricultural output is sometimes lower than expected to make it challenging to repay the formal credit accessed and from this, 8% of the respondent strongly disagreed 4% of the respondent disagreed, and 4% also were neutral 30% of the respondent agreed, and 54% of the respondent strongly agreed to the respondent.

On, if there are no risks hence to take the formal credit to buy their inputs, the study showed that. 60% of the respondent strongly disagreed to the statement, 22% of the statement disagreed to the statement. In comparison, 6% of the statement was neutral 8% of the respondent agreed, and 4% of the respondent strongly agreed to the statement.

Table 4.6. Firm discrimination

Gender

The study wanted to know if in Manyatta, people value women and if women own any land for farming. It got that 10% said yes and 90% of the respondents said no. to establish if women are not entitled to any collateral as a title deed since she is a woman, the study found, 6% strongly disagreed, 12% of the respondent disagreed 6% of the respondent agreed to the respondent and 76% of the respondent strongly agreed to the statement.

On the statement, if women are only responsible for a portion of the firm, the study found out that 4% of the respondent strongly disagreed. The same percentage of 4% disagreed to the statement, 2% of the statement was neutral for the statement, and 26% of the respondent agreed whereas 64% of the respondent strongly agreed to the statement.

The study established the main description of women’s social situation in their village is that women are never equal to men, 2% of the respondent strongly disagreed, and the same percentage disagreed and those that were neutral to the statement was 4% those that agreed where 8% of the respondent and those that strongly agreed to this statement where 84% of the respondent.

Table 4.7. Gender

Regression analysis.

The research was to determine factors affecting smallholder farmers in Manyatta sub-county Embu, and for that reason, a regression analysis was done to determine if collaterals, literacy level, number of financial institutions, women ownership of farms and firm discrimination determine accessibility to credit.

Coefficient

The model on regression tasted the effect on each variable on dependent variable where beta coefficient was used to indicate variance relationship, and t-value and p-value were used to determine the significance, the findings show that only literature level and collaterals have a significant effect on the accessibility to credit as shown in the table. The result shows that the literacy level produces a significant but negative impact on credit accessibility with a coefficient value of -0.326 with an absolute t-value of 1.846and p-value of 0.072 the result also shows that lack of collaterals produces a significant but negative effect on credit accessibility with a coefficient value of -0.398with an absolute t value of 1.992 and p-value of 0.053. the higher the level of education the higher the chances of accessing credit because it involves the process of filling entries and the farmers need to understand the conditions included in obtaining credit, also on lack of collaterals to apply for loans has led to almost of farmers not asking for the loan because they do not meet the requirements needed to qualify for the loan for expansion of the farm.

Tables 4.8. Regression summary

1. Dependent variable: accessibility of credit to the respondent

When all other variables held at zero, the result showed a unit change in collaterals would lead to -0.0398 increase in credit accessibility and the results also showed that a unit change in literacy level would result in -0.0326 in credit accessibility.

CHAPTER 5 SUMMARY, CONCLUSION AND RECOMMENDATION

The chapter provides the summary, finding, finding of the study and conclusion it also provides recommendation from the study findings.

Summary of the major findings

The study reported a response of 100%. The review was fair and relevant. However, it was revealed that most of the respondent were between the ages of 25-35 years; this shows that 40% is the youth. From the study, it also showed that 64% of the respondent in Manyatta Sub County is male, and the male and female own land are helpers. Majority of the respondent agreed that they have applied for loans and the loan helped in the expansion of their farms, the services offered by the financial institutions were effective.

In the model summary, the relationship indicated the independent variables (collaterals, number of financial institutions, literacy level, farm discrimination and women ownership of land) were significant in determining the access to credit.

The findings on collateral showed that most of the farmers in Manyatta, Embu County, have applied for loans to improve their firms but failed for they were short of collateral security; also financial institutes has insisted on the delivery of collaterals security as a primary lending state this has made most of them save, some borrow from friends and relatives which is not always easy.

The findings on the literacy level of the farmers, research showed that most of the farmers are seriously in need of the loans and meet the requirement. Still, the information on the availability of the loan and the charges are not communicated in the language he or she can also interpret education level does not equip them with the knowledge and skills needed to be more effective in the management of their firms.

The findings also showed that, on gender, women are so much discriminated and not allowed to own land it is believed in Manyatta that a man owns a land a woman is just a helper to him and that they are not entitled to any collaterals as a title deed since she is a woman.

In firm discrimination, the findings showed that a small firm is discriminated compared to the big firms. In lending credit, the big firms get credit more natural compare to the small firm; the financial institutions argue that the big firms (3 years and above) have experience compared to small firms(less than 3 years) and more so those in the rural areas.

The finding on availability of financial institutions, in Manyatta, most farmers have gotten to a point and realized an actual way to intergrade access to monetary services and also it has enabled farmers to mobilize savings which have resulted to more capital injection in the firm.

Conclusion of the study

The main aim of the study was to find out the factors affecting credit accessibility among smallholder farmers in Manyatta, Embu County. Based on the findings, we can conclude that if credit is accessible, then there will be firm growth.

Smallholder farmers experience discrimination when applying for a loan because the financial institutions tend to believe that the large scale farmers are more potential and qualified to get loans and can pay the loans. The older firms also get the advantage because they have experienced loan access to credit as compared to the farmers that have a small firm and needs to borrow loans to improve their firms

The study showed that education is an essential determinant for the smallholder farmer in Manyatta Embu. The loan process involves filling of some documents related to loan approval; an educated smallholder farmer is more informed and advantageous compared to one who has no education.

Accessibility to credit cannot make the farmers experience growth in production and his or her whole firm; it requires financial institution which lends the farmer, the financial institutions attracts more creditors since they compete in terms of marketing and efficiency in service delivering.

The study showed that most of the male awns the land and women are just but a helper and cannot get a farm of her own. Women given a chance and the title deeds of the land can also use, such as collateral and apply for a loan for the development of the firm.

Smallholder farmer finds it hard to generate a profit because of challenges in access to credit, and also the financial institutions find it hard to give the long-term term loans because they find it risky.

Recommendation

The financial institutions are prevailing on to create alertness to the smallholder farmers and also to put extent to aim smallholder farmers; this will inspire and encourage to access credit.

Smallholder farmers ought to ensure them having collaterals; this will help the process to obtain loans from financial institutions and also the required certifications needed to get the loan. This will encourage financial institutions to give loans easily and even the long term loan. This will lead to will to the growth of both financial institutions and the firm of the farmers.

The government should ensure that the potential investors are available and accessible for financial institutions since the more the number in the area, the more the smallholder farmers find it easy to access credit.

The government should ensure that laws made are followed; this is to provide women to get their rights townland and that they can access and are not discriminated by society.

The government should come up with ways of reducing the interest rate; this will encourage smaller holder farmers to apply for the loans.

The financial institutions in the area should ensure that the terms put and information can be understood or still ensure that there is one who can translate the language to the farmers to understand.

Suggested for further study research

The study only focused on factors affecting credit accessibility among smallholder farmer. It is recommended the other studies to be done to determine other factors that affect access to credit. Additional studies to be done on the role of the financial sector in the development of the agricultural industry.

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RESEARCH QUESTIONS

Kindly have some minutes to go through this questionnaire. Your trustworthiness responses will stand to be secret, but your opinions in blend with those of others remain to be very significant in this research. Respond to all the queries kindly.

SECTION A: DEMOGRAPHIC DETAILS

1. Gender

Male (    )

Female (    )

2. Age………….
3. Which is your level of education? Primary(   ) secondary(    ) tertiary (    )
4. How much was your business worth in Kenyan shillings…………………
5. Are you employed yes( )      No(     )

SECTION B:

Part one; Access to Credit

1. what is/are your major sources of financing

Saving (     )

Bank loans or loans from other financial institutions (     )

Borrowing (     )

Other services, (please specify)……………………………………………………………………………..

2. in your opinion how accessible is the loan from banking institutions

Very accessible (    )                                                            accessible (     )

Moderately (      )                                                                 slightly (     )

3. Have you ever applied for a loan from a bank?

Yes (     )    No (     )

If No say why

…………………………………………………………………………………………………………………………………………………………………………………………

If yes, did the credit improve your firm performance?

Yes (     )                                              No (     )

4. Rate the credit services offered by financial institutions in your area

Poor (     )   average (     ) neutral (     ) effective (    ) very effective (     )

5. Indicate your level of agreement with the following aspects of collateral and credit accessibility among smallholder farmers by using a scale of 1-5 where (1) strongly disagree (2) disagree (3) not certain (4) agree (5) strongly agree.

6. What is your level of agreement with the following statement relating to farmers’ literacy level and credit accessibility? Use a scale of 1-5 where 1, strongly disagree 2, disagree 3, not certain 4, agree 5, strongly agree.

GENDER

7. Indicate the various roles as a woman farming

………………………………………………………………………………… …………………………………………………………………………………

8. Do women own the land/portion?

Yes (  ) No (   )

9. If no indication, who owns ……………………………………………………..
10. Kindly indicate the extent of your agreement on the following institutional-based factors that affect access to formal credit by smallholder farmers in this region? Rate where 1 very great size and 5 is to no extent

FIRM DISCRIMINATION.

11. Do you experience any type of risk in access or management of formal credit for the development of the tea farm? Yes( ) No(     )
12. Please indicate the extent of agreement on the following risk-based factors that affect access to formal credit by small scale women tea farmers in this region? Rate where 1 very great extent and 5 is to no extent

NUMBER OF FINANCIAL INSTITUTIONS

13. How many institutions are in your area ………….
14. Have you ever applied to any institutions that are in your area? Yes( ) No (    )
15. In your own opinion indicate the level of agreement with statement below relating to a number of institutions and its influence to credit among smallholder farmers. 1 shows strongly disagree 2 disagree 3 not certain 4 agree 5 strongly agree

THE END……..