Factors Influencing Access to Rural Finance Market by Different Actors in Climate Smart Agriculture in Kenya

Abstract

In Kenya, small holder farmers face climate change related challenges. It is therefore imperative to enhance adaptive capacity through climate smart agriculture (CSA) technologies. Access to finance is a significant enabler for adoption of CSA technologies yet small holder farmers, especially women, have an acute financing gap for agriculture. The purpose of this study was to carry out an in-depth analysis of rural finance markets that support agriculture and identify factors that influence access by different actors. The study was conducted in eight (8) Kenya Climate Agricultural Project (KCSAP) counties in Kenya. Both qualitative and quantitative approach was used for data collection. A probit binary regression model was used to examine factors perceived to influence farming household access to rural finance market. Results showed a significant effect (P<0.001) of gender, education level, marital status, household size, membership in farmers association, number of months household head resided on-farm in previous year, and household total asset value. Conversely, findings for rural finance actors showed a significant effect (P<0.001) on gender, education level, years of business experience, distance to financial institution and operation of business under partnership. The study recommended that in order to increase utilization of rural finance market services by various actors, following factors are key; Capacity building on both financial literacy and digital banking, locality of financial services should be closer to clients especially those in remote areas, a gender-transformative approach in order to increase women access to rural financial services while also alleviating the gender inequalities in socio-cultural norms.