RELATIONSHIP BETWEEN FARM PRODUCTION CAPACITY AND AGRICULTURAL CREDIT ACCESS FROM COMMERCIAL BANKS

Abstract

In Kenya and across the globe, the proportion of commercial bank’s loans the agricultural sector relative to other sectors is generally low. This is despite the considerable financial intermediation opportunities resulting from a low agriculture orientation index by most governments to the sector. This study aimed at investigating the influence of a borrower' production capacity on access to commercial bank credit. The target population were 21, 576 dairy farmers registered with the livestock production unit in Murang’a County, Kenya. A double hurdle approach was used for inferential analysis. Findings revealed that a borrower’s production capacity had a significant positive influence on credit access. To enhance the proportion of commercial bank’s credit to the agricultural sector, the study recommends that a deliberate dissemination of information about the usability of production resources in credit processes, including the legal provisions on alternative collaterals, and insurance contracts in credit processes.