joechoka/Determinants-of-Agricultural-Credit-Performance-in-Kenya

Analysis of Determinants of Agricultural Credit Performance in Kenya: The Case of Agricultural Finance Corporation, Uasin Gishu District # Analysis of Determinants of Agricultural Credit Performance in Kenya ## The Case of Agricultural Finance Corporation, Uasin Gishu District **Author:** Jackson Opati Echoka **Institution:** University of Nairobi **Year:** 2010 ## Abstract The main research objective was to analyze the determinants of agricultural credit performance in Agricultural Finance Corporation (AFC) Kenya. The specific objectives were to analyze the historical and current performance of AFC and test the null hypotheses that costs of lending, institutional organization and group lending have no influence on delinquency of agricultural credit in AFC Uasin Gishu District of Kenya. The problem stems from poor performance of agricultural credit in AFC perceived through a declining growth trend in portfolio and client base, Profit before Tax (PBT), and persistent high loan delinquencies. The method used is an empirical analysis of AFC corporate performance records and a truncated regression of secondary data from AFC loans in Uasin Gishu District. A Maximum Likelihood Estimates (MLE) Tobit model was utilized because the dependent variable, delinquency rate, is non-negative and limited at zero. The MLE option adjusts the estimates of the coefficients to take into account the effect of truncating the sample at zero. The study established that agricultural credit delivered through AFC faces both external and internal challenges. External challenges relate to the policy environment, climate, market and socioeconomic risks. Internal challenges are associated with interest rates charged, operational prudence and poor lending practices. The tests of significance led to rejection of the null hypotheses and the conclusion that the costs of lending, institutional arrangements and group-lending activities influence the delinquency rate and, therefore, the performance of agricultural credit provided by AFC in Uasin Gishu District, Kenya. This implies that policy intervention is necessary to transform AF …