STRATEGIC FACTORS AFFECTING ACCESS TO CREDIT FACILITIES BY SMALLHOLDER DAIRY FARMERS IN GITHUNGURI SUB-COUNTY, KIAMBU COUNTY, KENYA
Abstract
There is generally limited access to credit facilities for Small and Medium Enterprises (SMEs) by commercial banks in most African countries. This has been attributed to factors such as lack of valuable assets, high risk profile of Small and Medium Enterprises (SMEs), an oligopolistic financial sector and biasness by commercial banks against the SMEs with respect to accessing credit facilities such as loans, overdrafts or trade finance related credit products like guarantees and letters of credit. Many financial institutions have not given much priority to SME funding due to difficulties encountered in administering credit facilities to the SMEs. This study sought to evaluate the strategic factors that affect access to credit facilities by Smallholder Dairy Farmers (SDFs) in Githunguri Sub-County, Kiambu County in Kenya. A descriptive research design was applied while the target population comprised of SDFs in Githunguri Sub-County who rear not more than 10 dairy animals which are milked to raise income from the sale of milk. This study employed stratified random sampling technique in determining the sample size of 365 respondents from a total of 7423 SDFs selected based on the County Assembly Wards. Primary data was collected from the farmers using self-administered semi structured questionnaires. Based on the research findings, the study concluded that collateral availability, financial information awareness, farmer’s managerial competency and credit requirements all affected access to credit facilities by SDFs in Githunguri Sub-County. Furthermore, based on research findings and conclusion, the study recommended that SDFs in Githunguri Sub-County should aimed at possessing high value collateral, maintain proper financial records, endeavor to improve their managerial competency levels, maintain a good track record and credit rating with financial institutions so as to increase their chances of qualifying for credit facilities form financial institutions. On the other hand, financial institutions should consider lowering finance charges, simplifying the end to end credit processes, innovate finance products more ideal for the SME category and have alternative communication channels compatible with the SME’s in order to attract more SDFs for credit advancement.
Key words: Collateral Availability, Information Awareness, Managerial Competency, Credit Requirements
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DOI: http://dx.doi.org/10.61426/sjbcm.v4i2.470
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