Institutional lending policies and the use of credit funds among small scale farmers in Nakuru district, Kenya
Atieno, R.
Savings and Development 22(2): 233-247
1998
Document Number: 328829
It is noted that agricultural credit in Kenya has been regarded as an important means for increasing farm production especially among small scale farmers whose lack of adequate financial resources is seen as one of the constraints hindering increased agricultural production. Various policy measures have been used to direct credit funds to specific agricultural enterprises and types of farmers as a means of ensuring that farmers use credit funds in such a way as to realise maximum benefits. The paper evaluates the effects of such policies on the actual use of credit funds by farmers, using cross-sectional farm survey data from 1991 from a rural area in Kenya . Results of the study show that the restrictive lending practices employed by the institutions are not necessarily effective in ensuring the use of credit funds for purposes intended by the institutions. It is further shown that different categories of farmers respond differently to specific factors in their decisions to use credit funds. It concludes that credit should be provided to farmers on the basis of their production potential, with the market conditions left to direct their investment decisions.