The Effect of Types of Agricultural Credit Programmes on Productivity of Small Scale Farming Businesses in Kenya: A Survey of Kimilili Bungoma Sub County

Agricultural credit is considered as one of the strategic resources for pushing production to the high horizons consequently raising the living standards of the rural poor farming community. Harnessing the potentials of credit to stabilize and perhaps increase resource productivity and output growth in Agriculture is particularly justified when farmers face very low savings capacity, poorly developed rural financial markets and availability of appropriate farm technologies whose adoption is constrained by shortage of funds. Agriculture demands different forms of inputs to be productive, among which, credit is indispensable.Based on the need to promote an innovative, commercially-oriented and modern agriculture, Agricultural credit as a key constraint facing the farmers in food production was chosen for this study.The study examined the effect of Agricultural credit programmes on the productivity of rural farming households in Kimilili Bungoma Sub County.The study adopted a cross sectional survey design, wheredata was collected, with the use of a well-structured questionnaire, from 123 randomly selected small-scale rural farmers, who are users of micro-credit based on their statement, through multi-stage sampling technique.The data was processed and analyzed using the Statistical Package for Social Sciences (SPSS). Descriptive statistics was used to analyse the qualitative data while cross-tabulations were done to examine the relationship between variables. Farmers’ perceptions about the effect of credit were measured on a likert scale. The findings of this study showed that, Agricultural credit has the capacity to enhance the income of farmers who utilize it by more than 100% and this clearly defines the role of credit in the farming sector. Credit not only helps to expand the economies of size but also helps to increase the productivity of farms from the available resources. All the three types of credit i.e. seasonal, development and agribusiness credit complement each other in addressing the value chain. i.e. production ,processing and marketing. It is recommended among other things that, the government should provide attractive incentive system to farmers so as to boost production from the smallholder sector. Along with this, “Soft loans” should be advanced to farmers on very generous terms. The findings of this study suggest that, agricultural credit is productive, but its outreach is limited to a small proportion of the population. Its outreach should therefore be expanded and collateral requirements relaxed so that credit has its desired impact. There is little doubt that, agricultural credit channeled in the right direction can have significant anti-poverty effects, and that broadening the outreach of formal lending institutions can be a step forward in the right direction. Keywords: Credit, Productivity,Income, Agriculture credit, Seasonal credit, Development credit, Agri- business credit