Financing Agribusiness: Potential Determinants of Financial Inclusion for Smallholder Rural Farming Communities in Kenya

2021 ◽  
pp. 097300522110343
Author(s):  
Castro N. Gichuki ◽  
Charles Wambu Kamau
Keyword(s):  
Commercial Banks ◽  
Credit Rationing ◽  
Probit Model ◽  
Commercial Banking ◽  
Financial Inclusion ◽  
Mobile Banking ◽  
Heckman Selection Model ◽  
Agricultural Credit ◽  
Credit Access ◽  
Lending Institutions

The purpose of this article is to empirically examine and compare the factors or determinants of financial inclusion in commercial banking institutions, microfinance banks, mobile banking platforms and table banking groups (informal banking groups) in Kenya. The data used in the study were obtained from 631 small and micro-sized (SMS) farming enterprises in Kenya. We use probit model to empirically establish the factors that determine the probability of small and micro-sized farming enterprises in accessing agricultural credit from the four major lending institutions. Also, we apply Heckman selection model to establish the determinants of agricultural credit rationing. OLS model is used to investigate the determinants of agricultural credit delinquency rates in the lending institutions. The results show that female-owned SMS farming enterprises are likely to access less agricultural credit amount from table banking groups, own small farms with no title deed and own less valued assets compared to male-owned SMS farming enterprises which access agricultural credit from commercial banks and microfinance banks. Further results revealed that household dependency ratio was a significant determinant factor in agricultural credit access from mobile banks, commercial banks and table banking groups. Additionally, agricultural credit delinquency in mobile banking is significantly reduced by distance to the banking agent. The availability of mobile banking agencies within village centres would considerably enable agri-entrepreneurs to make credit repayment within the required period.

scholarly journals Characterization of smallholder farmers and agricultural credit institutions in Rwanda

2021 ◽  
Vol 21` (01) ◽  
pp. 17343-17364
Author(s):  
Nathan K Taremwa ◽  
◽  
I Macharia ◽  
E Bett ◽  
◽  
...  
Keyword(s):  
Information Asymmetry ◽  
Smallholder Farmers ◽  
Arable Land ◽  
Agricultural Credit ◽  
Convenience Sample ◽  
Credit Access ◽  
Access To Credit ◽  
Information Gap ◽  
Lending Institutions ◽  
Credit Institutions

The significance of access to agricultural credit in perpetuating agricultural productivity is unquestionable, because it is a means to achieving optimal productivity. The minimization of any barriers to agricultural credit access should,thus,be a global priority. One of the most significant and current barriers to agricultural credit access is information asymmetry which results into mutual distrust between lending institutions and borrowers in this case the smallholder farmers. To address information asymmetry, both the lending institutions and borrowers need to have definitive descriptive information about either party. Without the profiling of institutions and potential borrowers, an information gap persists, thereby increasing mutual distrust. This study addresses that gap, in the context of Rwanda by characterizing smallholder farmers and agricultural credit institutions. Across-sectional survey design was used in this study with smallholder farmers and staff in agricultural credit institutions in the Eastern, Western, and Central provinces of Rwanda as the units of analysis. A multistage sampling procedure was used,with stratified sampling of administrative levels spanning from province(stage 1) to districts (stage 2) and sectors(stage 3),followed by a simple random sampling of cells per sector, and the convenience sample of households. Staff in the financial institutions were purposively sampled. The data collected was analyzed using principal component analysis and cluster analysis with the K-means statistic(SPSS version 25). The largest cluster of smallholder farmers has the following characteristics: household size of1to 5 people, farmers with education, owning arable land not exceeding a hectare, with more than five years of farming experience,earning from other off-farm activities, with no dependents under five years of age, and renting less than an acre of land. As for agricultural credit institutions, the largest cluster has following compositions:have mechanisms or measures established for managing loan defaults with the majority using refinancing, rescheduling, and collateral release, with variable loan payback options, and provide targeted agricultural credit to farmers such as agricultural input premium.The research findings are particularly pertinent for maize-and rice-growing farmers,and how to reduce the information gap and the implications of broadening access to credit to smallholder farmers were discussed. This study emphasizes the need for characterization for both parties to be better informed about the characteristics and dynamics of each other, all in a bid to lessen asymmetric information and thus improve access to credit.

scholarly journals Women Access and Awareness of Financial Inclusion in Indonesia

2021 ◽  
Vol 19 (1) ◽  
pp. 39-50
Author(s):  
Lienggar Rahadiantino ◽  
Ariska Nurfajar Rini
Keyword(s):  
Mobile Phone ◽  
Financial Institutions ◽  
Probit Model ◽  
Financial Inclusion ◽  
Least Square ◽  
Mobile Banking ◽  
Ordinary Least Square ◽  
Savings And Loan ◽  
Saving Behavior

The financial system plays a role in creating a community economic development, especially overcoming gender disparities. This paper analyzes the effect of mobile phone on the financial inclusion of women's in Indonesia involving data from household surveys provided by the 2014 Family Life Survey. We use the probit model with Ordinary Least Square (OLS) methods and the variable procedure to examine how the role of mobile phone on women's awareness in accessing financial institutions, as well as increasing savings and loan ownership. Our estimation results found that mobile phone penetration significantly increased awareness of women to access formal financial institutions, improve saving behavior, higher credit amount and access mobile banking. Therefore, mobile phone brings great benefits in increasing financial inclusion, especially women in Indonesia.

scholarly journals Effect of Mobile Banking on Financial Inclusion Among Commercial Banks in Kenya

2021 ◽  
Vol 2 (3) ◽  
pp. 184-197
Author(s):  
Harwood Kajirwa Isabwa
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Pearson Correlation ◽  
Primary Source ◽  
Secondary Data ◽  
Target Population ◽  
Financial Inclusion ◽  
Mobile Banking ◽  
Mobile Platforms ◽  
Study Results

Mobile banking is a precursor for the realization of financial inclusion among commercial banks in Kenya. The study's main objective was to determine the effect of mobile banking on financial inclusion among commercial banks in Kenya. The study adopted a positivism research philosophy. The study adopted an expo-facto research design because secondary data was the primary source data. The target population was 43 commercial banks in Kenya. The sample size was 39 commercial banks, but only ten commercial banks were selected because they had the best mobile banking apps. Inferential statistics adopted were; Pearson correlation and regression analysis. The study results revealed that mobile funds transfers significantly affect financial inclusion (β =1.697, p= 0.000). Cash withdrawals via mobile platforms significantly affect financial inclusion (β =1.195, p= 0.000). The study concluded that mobile banking has a significant effect on financial inclusion among commercial banks. In contrast, deposits via mobile platforms have a significant positive effect on financial inclusion (β =.354, p= 0.000). The study recommends that all financial institutions should adopt mobile banking as it helps to achieve financial inclusion. The banking sector should adopt the most appropriate mobile banking strategies to enhance financial inclusion.

Flexible loans and access to agricultural credit for smallholder farmers in Kenya

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fredrick Onyango Odhiambo ◽  
Radha Upadhyaya
Keyword(s):  
Smallholder Farmers ◽  
Multiple Correspondence Analysis ◽  
Household Wealth ◽  
Truncated Regression ◽  
Agricultural Credit ◽  
Content Type ◽  
Credit Access ◽  
Access To Credit ◽  
Main Determinants ◽  
Lending Institutions

PurposeThe purpose of this paper is to determine the level of flexibility in loan products offered to smallholder farmers in Siaya County in Kenya and to examine the effect of flexibility on access to credit.Design/methodology/approachThe paper uses primary survey data from a sample of smallholder farmers in Siaya County in Kenya who had borrowed from various lending institutions within the study area. The paper develops an index variable of loan flexibility using multiple correspondence analysis (MCA) technique. The model is estimated using both OLS and truncated regression analyses. Access to credit is measured as the amount of loan borrowed by each farmer.FindingsThe authors find that the level of flexibility of loans offered to farmers is low. Furthermore, the authors find that the level of flexibility is not significantly correlated to access to credit. Further analysis using individual components of flexible loans show that refinancing and lines of credit are more likely to improve access to credit when farmers are more educated and wealthier, respectively. The age of a farmer, the type of lender, the type of loan, education and household wealth are the main determinants of access to credit.Originality/valueThe paper adds to the debate on access to credit by showing that theoretically, while loan flexibility should lead to higher credit access, this is not a key determinant of access to credit in this context.

scholarly journals Digital Banking Strategy and Financial Inclusion among Commercial Banks in Kajiado County. A Case of Kenya Commercial Bank in Kajiado County, Kenya

2021 ◽  
pp. 1-14
Author(s):  
Johnstone Muli Makau ◽  
Clement O. Olando
Keyword(s):  
Commercial Bank ◽  
Financial Services ◽  
Commercial Banks ◽  
Quantitative Methods ◽  
Commercial Banking ◽  
Financial Inclusion ◽  
Efficient Technology ◽  
Banking Services ◽  
Digital Service ◽  
Banking Strategy

Despite the expansive infrastructure of commercial banking in Kenya, a large percentage of the country’s population is excluded from access to formal banking services/products. Further, there is insufficiency of credible information on the manner that digital banking strategies relates to inclusion on access to financial services. Accordingly, this study was in search of bridging the gap with the objective of evaluating the effects of the digital banking strategy on financial inclusion midst commercial banks in Kajiado County (a case of Kenya commercial bank in Kajiado county). This research utilised quantitative methods and espoused descriptive research design. It regarded the 323 Kenya commercial banks outlets (branches and bank agents) in Kajiado County for its target population and obtained a sample size of 179 respondents. A closed-ended questionnaire was administered using drop and pick approach, was developed for gathering data to be acquired from primary sources. This research adopted quantitative analysis approach to yield descriptive statistics and inferential statistics. The study concludes that at 5% error level, digital banking channels, digital financial infrastructure, convenience of digital financial services, have a statistical positive significant effect on financial inclusion among commercial banks in Kajiado county while digital service offering has a statistically insignificant effect on financial inclusion among commercial banks in Kajiado county. The study recommends that the commercial banks in Kajiado should, provide digital banking services to areas that are not easily accessible, acquire adequate infrastructure facilities and adopt efficient technology, offer simple, cost effective and secure services to their customers and provide wide variety of digital service.

scholarly journals Technological Banking Innovations and Financial Inclusion by Commercial Banks in Nairobi County, Kenya

2020 ◽  
Vol 2 (1) ◽  
pp. 1-27
Author(s):  
Jeremiah Koori ◽  
Njoki Grace Wanjiku ◽  
Gerald Atheru
Keyword(s):  
Research Design ◽  
Commercial Banks ◽  
Secondary Data ◽  
Internet Banking ◽  
Business Environment ◽  
Financial Inclusion ◽  
Confirmatory Test ◽  
Mobile Banking ◽  
Electronic Banking ◽  
Study Objective

Financial inclusion is the provision of financial services at affordable costs to sections of underprivileged and low-income segments of society. Failure to constantly redesign strategies that help the commercial banks adapt to changing business environment may lead to a strategic mismatch between what they offer and what markets demands.  The study objective was to assess technological banking innovations and financial inclusion by commercial banks in Nairobi County Kenya. The study was anchored on the theory of financial intermediation, diffusion of innovation theory and Silber’s Constraint theory of Innovation. A descriptive research design and a positivism philosophy were used because the conceptual hypotheses were drawn from existing theories and identified knowledge gaps as founded on the research design. Multiple regression model was employed in this study. For the purpose of this investigation, the target population included all the 42 registered commercial banks operating in Nairobi County, Kenya in the year 2016. Purposive sampling technique was used to determine the sample size. Thirteen (13) selected banks that had successfully implemented technological banking innovations in Nairobi County were purposively sampled for the study. Both primary and secondary data was used in this study. Primary data was collected using questionnaires. Secondary data on mobile bank transactions and mobile phone subscriptions in the banks for the period between 2011 and 2016 was obtained from Central Bank of Kenya, Kenya National Bureau of Statistics and the Banking survey manuals. Questionnaires were administered to randomly selected respondents. The confirmatory test for multicollinearity was done using the Variance Inflation Factor. Data was analyzed using correlation, Goodness of Fit, analysis of variance, F statistic/significance of the study variables and regression of coefficients which were used to draw inferences on the relationship between the study variables. Data was presented using tables and figures. Results of the study indicated that the predictor variables; mobile banking, agency banking, electronic banking outlets and internet banking have an influence on financial inclusion. Correlation results also indicated that mobile banking, agency banking, electronic banking outlets and internet banking were positively associated with financial inclusion. Additionally, the regression findings indicated that mobile banking, agency banking and electronic banking outlets were statistically significant predictors of financial inclusion. However, Internet banking had a significance level of 0.586 which is higher than the conventional threshold of 0.05 which rendered the variable as statistically insignificant in prediction of financial inclusion. The findings concluded that mobile banking, agency banking, electronic banking outlets and internet banking have an influence on financial inclusion with the technological innovations being well adopted by the customers in the respective banks .The study recommended that the banks’ management should make use of these research findings to come up with innovative approaches of improving financial inclusion while maintaining the existing ones in the conduct of their business so as reach more clients with their products and services.

Is there discrimination against the agricultural sector in the credit rationing behavior of commercial banks in Ghana?

2018 ◽  
Vol 78 (3) ◽  
pp. 348-363 ◽  
Author(s):  
Frank Gyimah Sackey
Keyword(s):  
Interest Rates ◽  
Financial Services ◽  
Commercial Banks ◽  
Agricultural Sector ◽  
Credit Market ◽  
Credit Rationing ◽  
Probit Model ◽  
Content Type ◽  
Access To Credit ◽  
Individual Firm

Purpose The purpose of this paper is to examine if credit rationing persists even in the era of financial liberalization, the extent to which individual, firm and loan characteristics influence the rationing behavior of commercial banks and whether the agricultural sector is discriminated against in the commercial bank credit market. Design/methodology/approach The study employed a probit model with marginal effects and a generalized Blinder-Oaxaca decomposition estimation on a randomly selected data of 1,239 entrepreneurs from eight commercial banks’ credit records about their individual, firm and loan characteristics. Findings The study revealed that credit rationing persists and that applying for a relatively longer payment period, providing collateral and guarantor, being illiterate, being relatively older and being in the agricultural sector increases the likelihood of being credit rationed, while having some relationship with the bank, having non-mandatory savings and applying from a bank with relatively high interest rates reduce the likelihood of being credit rationed. The study also revealed a credit gap of 17.77 percent and a positive discrimination against borrowers in the agricultural sector as the gap was largely being influenced by unexplained factors. Research limitations/implications The research was intended to cover a large number of commercial banks in Ghana. However, most of the banks were unwilling to provide such information about their borrowers; hence, the research was limited to only eight commercial banks who provided the author with the information needed for the study. Practical implications The study concludes that policies that enhance human capital, women, and older access to credit and agricultural-oriented financial services and others, will go a long way to reduce rationing and increase access to credit, especially to the agricultural sector. Social implications The research proposes the use of group lending as a form of collateral and monitoring to ease risks and default, and hence supports sustainable funding to increase access and outreach. Originality/value The paper looks at the comprehensive way about the various factors determining credit rationing in that it considers not only the individual, economic/firm and loan characteristics but also the extent to which discrimination toward the agricultural sector exists in the commercial banks credit market.

Income Diversification and Bank Efficiency in Vietnam

2017 ◽  
pp. 52-67
Author(s):  
Sang Nguyen Minh
Keyword(s):  
Regression Model ◽  
Commercial Banks ◽  
Banking System ◽  
Operational Efficiency ◽  
Commercial Banking ◽  
Tobit Regression ◽  
Income Diversification ◽  
Positive Effects ◽  
Study Results ◽  
The Impact

This study uses the DEA (Data Envelopment Analysis) method to estimate the technical efficiency index of 34 Vietnamese commercial banks in the period 2007-2015, and then it analyzes the impact of income diversification on the operational efficiency of Vietnamese commercial banks through a censored regression model - the Tobit regression model. Research results indicate that income diversification has positive effects on the operational efficiency of Vietnamese commercial banks in the research period. Based on study results, in this research some recommendations forpolicy are given to enhance the operational efficiency of Vietnam’s commercial banking system.

Effects of Financial Inclusion on Startup Establishment in OECD Countries

2018 ◽  
Vol 34 (1) ◽  
Author(s):  
Dinh Thi Thanh Van ◽  
Nguyen Thuc Trang
Keyword(s):  
Success Factors ◽  
Oecd Countries ◽  
Financial Inclusion ◽  
Economic Research ◽  
Mobile Banking ◽  
Policy Makers ◽  
Academic Researchers ◽  
Financial Index ◽  
Enterprise Survey

Financial inclusion and startup are two topics, which recently get attention of academic researchers and policy makers in Vietnam. One of the important factors for setting up a successful startup is the financial capability of the owners. Therefore, financial inclusion has a strong correlation with startup establishment. This article tested the effects of several factors in financial index (findex) developed by World Bank on startup establishment in some OECD countries. The result showed that borrowing from friends and relatives along with from credit institutions and opening a debit account at banks have  significant impacts on startup establishment in these countries. Finally, the article presented several recommendations for policy makers to stimulate the startup growth in Vietnam in the next time. Key words startup, financial inclusion, startup establishment References 1. Colman Msoka (2015), “Financial inclusion and microfinance in Tanzania”, Inclusive growth: Tanzania Country Report2. Endeavor-GEM, 2011, “High-Impact Entrepreneurship Global Report”3. Eric Ries, 2012, “The Lean Startup” book”, http://www.stpia.ir/files/The%20Lean%20Startup%20.pdf 4. European Startup Monitor, 2015, “European Startup Monitor 2015”, http://europeanstartupmonitor.com/fileadmin/presse/download/esm_2015.pdf 5. Jennifer Dahlin Ivarsson (2014), “Mobile-banking and entrepreneurship: Is there a link? A case study on South Africa”, Nationalekonomiska Institutionen, Box 7082, ISSN 0283 – 15896. Maher Al-Mahouq (2010), “Success factors of small and medium-sized enterprises(SMEs): The case of Jordan”, Anadol University jourmal of social sciences, Cilt/Vol.: 10 – Say/No:1-16 (2010)7. Mohammed S.Chowdhury (2013), “Success factors of entrepreneurs of small and medium sized enterprises: Evidence from Banladesh”, Business and Economic Research, ISSN 2162 – 4860, 2013, Vol.3, No.2.8. OECD, 2015, “Entrepreneurship at a Glance 2015”9. Roman Angela, 2011, “SME’s sector access to finance: An overview”10. Yao Wang, 2014, “What are the biggest obstacles to growth of SMEs in developing countries? An empirical evidence from an enterprise survey”, JED 210 Paper

Financial Innovations and Performance of Commercial Banks in Kenya

2020 ◽  
Vol 2 (2) ◽  
pp. 21-33
Author(s):  
Naomi Wanja Ireri ◽  
Gladys Kimutai
Keyword(s):  
Rural Areas ◽  
Commercial Banks ◽  
Internet Banking ◽  
Ease Of Use ◽  
Primary Data ◽  
The Internet ◽  
Mobile Banking ◽  
Good Opportunity ◽  
Financial Innovations ◽  
Automated Teller Machine

Commercial banks in Kenya have embraced alternative banking channels which represent a shift in delivery of banking and financial services since the alternative banking have become synonymous with commercial banks in Kenya. While banks have succeeded in leveraging available technology and provide alternative avenues to customers for banking services, the challenge it faces today is optimizing the usage of these channels so as to improve on their performance. The general objective of this study was to investigate the effects of financial innovations on the performance of commercial banks in Kenya. The specific objectives of the study were to examine the influence of internet banking, mobile banking, agency banking and ATM banking on the performance of commercial banks in Kenya. The study was guided by agency theory, balanced score card and diffusion of innovation theory. This study employed a descriptive research design. The study targeted44 commercial banks in Kenya as at 2017. The 16 banks which embrace all the four financial innovations from 2013 to 2017were selected using purposive sampling method. The sample size was 80 respondents who comprised of 5 senior management employees in each of the selected banks.This study used questionnaire to collect primary data from the respondents. Content analysis technique was used to analyze qualitative data collected from open ended questions in and reported in narrative form. Descriptive statistics such as mean and standard deviation were used to analyse the quantitative data. Multiple regression analysis was used to show the relationship between independent variables against dependent variable. The study revealed that internet banking, mobile banking, agency banking and ATM banking had a positive and significant effect on the performance of commercial banks. Thisstudy concludes that the banking industry has benefited tremendously from the development of the Internet. The Internet fundamentally changed the way in which banking networks are designed to meet the client demands and expectations. Mobile banking provides a good opportunity to commercial banks in Kenya to reach many mobile phone subscribers in Kenya who had remained unbanked and unreached due to limited access to bank branch networks in the country. The access to the large masses through mobile banking of the population gives banks the opportunity to grow by reaching the unbanked population. Agency banking has led to accessibility of financial service to many customer in remote areas and hence an increase in effectiveness and efficiency in service delivery. Customers are satisfied with the automated teller machine services because of ease of use, transaction cost and service security but not satisfy with automated teller machine dispense of cash. The study recommends that the public and businesses must be encouraged to use Internet banking in their daily activities, including deposits, payments and money transfers. Commercial banks in Kenya should ensure convenience and security of mobile banking through written guidelines on convenience and security of mobile banking. Commercial banks in Kenya should increase the number of agents in estates and in the rural areas. This can be done by reducing the requirements of becoming a bank agent. The banks should employ customized software that records relevant information on automated teller machine cards so that banks can establish whether unauthorized transaction has taken place or not.

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