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A research Project submitted to the Department of Business Administration in the school of Business, in partial
fulfillment of the requirement for the degree of Master of Business Administration (Finance Option) of School
of Business, Jomo Kenyatta University of Agriculture and Technology.
Author: Rhoda Kemboi

Year of Study: 2015-2016

This study was set to determine the critical factors that affect the accessibility of credit by small-scale dairy
farmers in Trans Nzoia County of Kenya. This was through the establishment of factors influencing small
scale dairy farmers decision in seeking credit services, evaluation of how collateral security requirements
and lending procedures offered by financial institutions affects borrowing characteristics of small-scale
dairy farmers in the county. A survey study design was used. The study purposively selected a sample size
of 100 dairy farmers who were randomly selected. One region out of seven regions as per KDB
geographical spread was selected and one factory from the region. Then 100 dairy farmers registered at the
KCC factory were chosen randomly. The stratum was based on the sizes of dairy farms of the respondent.
Twenty credit providers were selected using the list of Banks licensed to operate in Kenya and the
SACCOs that provide credit to the small scale dairy farmers as per records available at KDB. Main data
collection tools used were close-ended questionnaires. The data was analyzed by use of descriptive
statistics. The study findings depict a clear significance of this study in determining factors that affect
borrowing characteristics of small-scale dairy farmers in the county. Although an estimated 93% of the
farmers engage in dairy farming for income purposes, only 25% earn 50% and above of their income from
it. A multiple regression analysis to predict on factors affecting accessibility of credit depicted a
statistically significantly value of, F (6,164) = 1.384, p < .0005, R2 = 0.048. All the variables were
statistically significantly to the prediction variable, p < 0.05 apart from Account History variable which had
a missing correlation. However, main factors that are highly linked to poor borrowing characteristics of this
small scale dairy farmers include; Poor financial status, poor understanding of lending procedures and
terms issued by financial institutions and lack of high-value collateral to guarantee them a high borrowing
capacity. The study also depicts low market value of milk products as a reason behind the poor financial
status of these farmers hence hindering their capacity to easily access credit services. There is a great
significance of factors affecting credit accessibility by the small-scale dairy farmers in the area hence the
need for prompt interventions. The study recommends solutions to the highlighted factors including
enlightening these dairy farmers on the importance of accessing and utilizing credit services with an aim of
improving their dairy farming capacity just like their counters who practice large scale. There is also need
to improve infrastructure especially the roads and ICT so as to reach more farmers in remote areas. A ready
expo-market should be created for milk out of the county. This shall enhance demand increase for dairy
products, hence enabling farmers to see the need to seek credit services. This is because the financial
institution shall have the confidence of issuing loans to these farmers.