Factors Affecting Lending By Agricultural Based Financial Institutions: A Case Study of Agricultural Finance Corporation

Abstract

The purpose of the study is to assess factors affecting lending by agricultural based financial institutions. The objective of the study is to establish how transaction costs affect lending by agricultural based financial institutions. It investigates how appraisal process affects lending. It explores the type of collateral required by agricultural based financial institutions and how they affect lending. It seeks to find out how whether the location of formal institution effects lending by agricultural based financial institutions. It suggests possible answer on how these factors can be integrated to improve lending.

The agricultural finance corporation (AFC) was used as the case study. This study is useful to financial institutions dealing with agriculture, in that they will appreciate the effect of transaction costs; appraisal process collateral type and the location affect their lending. Hence it suggests what can be done by the intuitions to improve their client numbers. The literature review discusses the theory of transaction cost as well as other theories related to the topic of the study. It also looks at the empirical literature before drawing a conclusion. The research is a case study and used descriptive research design. The target population is 548 staff members of AFC. A sample size of 100 staff members was used as representative of the population. Data was collected using questionnaires, policy manuals and publications. It will then be captured and analyzed using the Statistical Package for Social Sciences.