EFFECT OF SUBSIDISED CREDIT FINANCING ON THE FINANCIAL PERFORMANCE OF SMALLHOLDER FARMERS IN KENYA: A CASE OF KIMIRA-OLUCH FARM IMPROVEMENT PROJECT

Abstract

The Kimira-Oluch Smallholder Farm Improvement Project was initiated in 2003 to
reduce poverty by increasing food security and income for about 3,000 households. The
appraisal study conducted in 2010 revealed that the project had not achieved its
productivity targets, primarily due to farmers’ inability to access essential inputs and
equipment. In response to the situation, a subsidised credit facility was introduced to
support needy farmers. The study’s purpose was to examine whether the intervention
improved beneficiaries’ financial performance, which was measured in terms of average
annual sales. To achieve this, a quasi-experimental design and a mixed methods
approach guided the research process. Data were sourced in October 2018 from 304
smallholder farmers, including 174 who accessed credit and 130 didn’t. Key findings
show that access to the credit facility was skewed in favour of male farmers; the amount
of credit accessed significantly correlated with farmers’ age, size of land and preintervention
income
level;
while
post-intervention
annual
sales
realised
by
beneficiaries

and

non-beneficiaries were significantly different. Despite this, the intervention caused
only a small effect size of about 23%, as indicated by Cohen’s d statistic. The findings
demonstrate that integrating subsidised credit facilities in smallholder irrigation
projects improved food security and income. This implies that subsidised financing
interventions remain important enablers of smallholder farmers and contributors to
poverty reduction in rural settings. Consequently, the study advocates for the
continuation of the subsidised credit facility for smallholder farmers in the project, and
initiation of similar interventions in other developing countries.
Keywords: Credit, Financing, Financial Performance, Smallholder, Farmer, Irrigation