Financing Horticultural Value Chain and Performance of Financing Institutions in Kenya

Abstract

Financing horticultural value chain financing has a large effect on performance of Financial Institutions in Kenya. The horticultural value chain financing adopted by the Financial Institutions influence the volumes of the loans procured by the Financial Institutions and thus the performance of the Financial Institutions and thus the performance in the industry. The horticulture sub-sector of agriculture has grown in the last decade to become a major foreign exchange earner, employer and contributor to food needs in the country. This growth notwithstanding, performance of Financial Institutions in this sector in Kenya continues to face a myriad of challenges in the management of credit access. Financial institutions' horticultural value chain financing approaches hamper access to horticulture products loans that increase output by improving farming practices. This research was therefore designed to investigate the effect of horticultural value chain financing on performance of Financial Institutions in Kenya. It is on this premise that the researcher sought to establish the relationship between horticultural value chain financing and performance of Financial Institutions in Kenya. The study was guided by a specific objective which is: To determine the effects of horticultural value chain financing on performance of Financial Institutions in Kenya. The study adopted a descriptive cross-sectional survey and inferential research design. The target population of this study was 54 financial institutions comprising 41 commercial banks and 13 registered Microfinance Institutions in Kenya (CBK, 2019). Data was collected through a survey using self-administered questionnaires delivered to Financial Institutions. The respondents who are the Heads of Credit and Credit line Managers of the various Financial Institutions provided an assessment of their horticultural value chain financing analysis.

Studies on horticultural value chain financing and performance of Financial Institutions in Kenya are scanty. To fill this glaring gap in this vital area of study, the researcher used linear multiple regression model to estimate the parameters. The study scientifically modeled the influence of horticultural value chain financing on performance of Financial Institutions in Kenya. The data was analyzed using descriptive and inferential statistics. Descriptive statistics produced frequencies and percentages while inferential statistics produced regression and correlation results which show the relationship among the variables. Statistical Packages for Social Sciences (SPSS) was used in the analysis of data and results were presented on frequency tables to show how the responses for the variables and indicators which were posed to the respondents.From ANOVA, since p value p=0.000 and was lower than p=0.05 (p value 0.000Ë‚0.05), the findings showed horticultural value chain financing significantly affects the performance of Financial Institutions in Kenya. Horticultural value chain financing had 76.5% effect on performance of Financial Institutions in Kenya.

From the findings, there is a positive relationship between horticultural value chain financing and performance of Financial Institutions in Kenya. Thus, it can be concluded that the performance of Financial Institutions in Kenya is influenced by horticultural value chain financing. The study suggests that the benefits of horticultural value chain financing need to be clearly communicated to minimize the fear that comes with lending the sector. Such benefits include improvement in decision-making, information flow, efficiency, competitiveness and financial performance. This study suggests that Horticultural Value Chain financing can be improved by being more focused in the global value chain process. Once the stages of the process are identified, deliberate diagnosis and proper planning prior to financing is required. At the center of all the Horticultural Value Chain are the activities from, production, processing, handling, packaging, storage & warehousing, distribution and marketing that are opportunities for financing. The study also suggests that resources should be allocated according to the priority areas identified in the horticultural value chain and adjustments made based on major changes in the performance target.