Determinants of Growth of Agricultural Credit among Commercial Banks in Kenya

Abstract

A robust and systematic agricultural sector contains the prospect to enable a country to feed its expanding population, promote employment, earn foreign exchange and furnish industries with raw materials, this formed the backbone of this study. The study sought to establish the determinants of growth of agricultural credit among commercial banks in Kenya.  The focus was on development of Kenya Commercial Bank agricultural financial services delivery in Kiambu County. Data was collected from eight branches of KCB bank operating within Kiambu County considered one of the agricultural rich counties in Kenya therefore a good representative. Adopting a descriptive research design the study used secondary data which was analyzed with the aid of SPSS Software version 21. The findings indicate that Profitability, Cost of Credit and Credit Risk have negative influence on the growth of Agricultural credits in Kenya. A unitary increase in these three variables has a negative influence on agricultural credit. However Loan Size positively influences growth in Agricultural Credit and ultimately growth of agribusiness. The study concludes that all the variables of this study affect the growth of agricultural credit and recommends stakeholders in Financial and Agricultural sector in Kenya to develop policies that strengthen commercial bank's support to agricultural sector in the county. They should also include subsidies to the Agricultural sector thus enhancing economic growth as per the Maputo declaration that requires governments to allocate at least 10 percent of their national budgetary resources to agriculture and rural development policy implementation