ROLE OF FINANCIAL KNOWLEDGE ON EXTENT OF CREDIT ACCESS AND PERFORMANCE OF WOMEN FARM ENTERPRENEURS IN KERICHO COUNTY, KENYA

ABSTRACT
Women farm enterprises in Kenya have in the recent past gained considerable prominence and attention. Several research studies have underpinned the role they can play in economic development and poverty reduction through increased production and employment. However, these farm enterprises have had limited access to credit to enhance their growth. Table banking (TB) is a concept that has been promoted, particularly among women, to enhance access to credit. The role of women farmers’ financial knowledge in influencing the extent of credit accessed and performance of women farm enterprises has not been clear in the empirical literature. In particular this study sought: to assess the level of financial knowledge among women members and non- members of TB groups; to determine the factors influencing the extent of credit access of women farm entrepreneurs; and to determine the role of financial knowledge on the performance of women farm enterprises. The study was based on data collected from a sample of 384 women entrepreneurs (including members and non-members) drawn from Kericho County. Multistage sampling technique was used to arrive at the intended sample and semi-structured questionnaires were used to collect qualitative and quantitative data through face to face interviews. The first objective was assessed using objective and subjective measures and was analysed using descriptive and inferential statistics. The second objective was analysed using the double hurdle model. The third objective was analysed using propensity score matching approach. The results revealed that more women belonging to table banking (71%) had high financial knowledge level compared to the counterparts (66%). The results also showed that the extent of credit accessed was positively influenced by financial knowledge, marital status, participation in off-farm occupation, risk-taking tendency, type of farm enterprise, total land owned and access to extension services; while it was negatively influenced by the degree of innovativeness and proactiveness of the women. Furthermore, financial knowledge impacted positively on performance of women farm enterprises as shown by the positive average treatment effect on the treated for all matching algorithms (ranging from KES 12265.15 to KES 19589.78) for savings and (KES 19460.60 to KES 26344.48) for enterprise margin annually. In conclusion, members of table banking exhibited high financial knowledge and that financial knowledge positively influenced both access to credit and performance of women farm entrepreneurs. Therefore, in a bid to further enhance the extent of credit accessed and performance of farm enterprises, the study recommends that, financial knowledge should be beefed up. This can be done through refocussing the modes of delivering financial knowledge to not only improving individual financial knowledge but also promoting proper use of financial resources.

CHAPTER ONE 
INTRODUCTION 
Background information 
Farm enterprises play a major role in triggering and sustaining economic growth in both developed and developing countries (Gordon and Brayden, 2014; Adefolake, 2016; Maksimov et al., 2016). This is through their potential for poverty reduction (Trivedi and Gaur, 2015), which is among the broader socio-economic objective in the Sustainable Development Goals (SDGs) (UNDP, 2014). In Kenya, farm enterprises account for over 50% of the total GDP with the Annual GDP growth projected at 6.4% in the year 2017 as compared to the registered GDP growth of 5.2% in 2014 (KNBS, 2014), with expected significant contribution from all sectors but majorly from farm enterprises (UNDP, 2012; KIPPRA, 2013; KNBS, 2014). In addition, farm enterprises contribute more than 50% of employment through creation of four out of five new job positions and represent over 90% of the private businesses in Kenya (Habib and Zurawicki, 2010; Osoro et al., 2013; Mbugua et al., 2014). 

Most developing countries, Kenya included, are experiencing an influx of the number of women venturing into farming, particularly the small scale farming in the recent years (Le and Raven, 2016). This is mainly attributed to advocacy on women empowerment programs and policies advanced by Governments and other institutions including International Labor Organization (ILO) and United Nations Development Fund for Women (UNIFEM). The advocacy emerged as a result of recognizing the importance of women in economic development in both developed and developing countries (Al-Dajani and Marlow, 2013). This is also as a result of different initiatives by governments and other development partners in encouraging women participation majorly in farm enterprises (Tambunan, 2009; Al-Dajani and Marlow, 2013). Women farm entrepreneurs are the facilitators of micro economic development in their communities and more so, significant contributors to the increase in the households’ level of income (ILO, 2008; UNIDO, 2012; Le and Raven, 2016). 

Despite the recorded success of women farm enterprises (McGowan et al. 2012; Le and Raven 2016), one of the obstacles to better performance of these enterprises is underfinancing (UNIDO, 2012). According to the Kenya Women Enterprise Fund Strategic (KWEFS) Plan (2009-2012), 40% of all Kenyan women have no access to finance at all and 40% have access to informal financial systems only. Previous studies (Kostov et al., 2015; Allen et al., 2016) have attributed this majorly to low levels of financial knowledge among other factors such as collateral, institutional factors, high transaction cost, socio-economic factors, and information asymmetry. According to statistics, the Kenyan population especially the rural women population that is around 51.3% have low financial knowledge and thus cannot efficiently manage their finances (Lusardi and Mitchell, 2008; FSD and KNBS, 2016). 

Financial knowledge has its definition differ by various studies though with a lot similarities. Warthington (2006) defined financial knowledge as the ability to make informed judgments and to take effective decisions regarding the use and management of money. Atkinson and Messy (2011) defined financial knowledge as a combination of awareness, skills, attitude and behavior necessary to make sound financial decisions and ultimately achieve individual financial well- being. Houston (2010) defined financial knowledge as the necessary numerical and non-numerical skills and understanding of basic economic concepts required for educated saving and borrowing decisions. The study adopted the later definition of financial knowledge. Therefore, financial knowledge is critical especially for the women population if they are to contribute to breaking the poverty cycle through participation in farm enterprises. 

Following the recorded challenge of underfinancing, the Kenyan government through the Poverty Eradication Commission (PEC) established table banking program. The major aim of table banking was to curb the financial problem through provision of credit to the women farmers. Table banking typically refers to a form of group funding whereby members pool their savings together and borrow immediately from the same savings either for a short or long period. This type of table banking takes the form of Grameen Bank of Bangladesh and the village savings and loan schemes of Zanzibar (Kariuki et al., 2014). As a result, over 50% of Kenyan adults and especially women are active in table banking program with more than half of the women in table banking groups citing this program as their only access to financial services (Gugerty 2007; Marti and Mair, 2009). 

Contrary to other formal financial institutions, table banking aim at helping rural women save and access affordable and easily available funds for investment in income generating projects such as farm enterprises. This is because it allows women groups to benefit through group guarantee and joint liability lending which is favorable to most lending institutions aiming to curb credit risk and default risk (Brown et al., 2011). This is attributed to the fact that members generally come from same geographic locations, share similar values and beliefs meaning that peer-pressure, social cohesion and cooperation often enhance timely repayment of loans (Atieno, 2012). Through table banking savings, women can easily dip into their savings to address a shock (Dupas et al., 2013; Silvia, 2015; Lambisia et al., 2016). In addition, members benefit from sharing ideas and knowledge on funds management and business experience thus creating social capital based on trust, which tends to facilitate resource exchange and value creation among entrepreneurs (Jonsson, 2015). This social capital becomes a motivating factor for table banking spread within a community (Asseto, 2014). As a result, women are urged to join hands in pooling resources to help overcome poverty and financial illiteracy through table banking programs (GOK, 2013; Kariuki et al., 2014). 

Following the recorded success of table banking programs, women across the country have resorted into these forms of banking by organizing themselves into groups of between 10-30 members (Aterido et al., 2013). Among these groups is the Social Economic Empowerment of Women Organization (SEEWO), a women group based in Kericho County. SEEWO was formed in 2010 as a non-profit making organization to empower the rural women both socially and economically through table banking (SEEWO, 2016). Therefore, through the table banking program, SEEWO women are in a position to access funds enabling them to start and run their agricultural SMEs that replaces ‘hands of beggar into the hands of the worker’ (meaning being self-reliant) (Atieno, 2012).

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Item Type: Kenyan Postgraduate Material  |  Attribute: 82 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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