The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya

Lack of access to credit is a key obstacle for economic development of transitional economies such as Kenya. The underlying problem is related to information asymmetry combined with the lack of collateral by low income households. Microfinance led group lending model offer a new way to deal with this problem without resorting to collateral requirements. The core issue in group lending is that it systematically exploits elements of social capital that inherently exist in groups into an incentive contract that substitutes collateral; a formal bank conventional requirement of lending that is virtually unavailable to the poor. This study sought to ascertain the influence of social capital dimensions on households’ participation and repayment performance in micro-credit groups in the study area. The study was conducted in Moiben Division, Uasin Gishu County, Kenya based on a sample of 174 households selected using a multi-stage sampling technique. The data was collected using a personally administered structured questionnaire. In the analysis descriptive statistics, Heckman two stage and a Tobit regression models were employed. The results show that individual and group borrowers had significant differences in gender, age, farm size, years of education, income and land tenure. It was established that household size, farm income and distance to the nearest financial institution positively influenced a household to join micro-credit group. On the other hand age, gender, years of education, farm size and interest rate were found to be significant and negatively influenced household decision to join micro-credit groups. The level of household participation in micro-credit groups measured by the number of loan borrowings was significantly and positively influenced by age, total income, years of experience in group borrowing and decision making index while farm size, heterogeneity index and density of membership had a negative affect on household number of loan borrowings. Lastly, the results on group loan repayment performance using the Tobit model revealed that experience in group borrowing, number of visits by loan officer, peer pressure, meeting attendance index and heterogeneity index positively and significantly influenced loan default rate while gender, household size, distance to the nearest financial institution and density of membership were significant but negatively influenced household loan repayment performance. The study therefore recommends that MFIs should increase awareness and encourage poor households to form micro-credit groups. These institutions are obliged to provide training to households on group dynamics in order to take advantage of social capital existing within well organized and managed groups

Social Capital Dimensions and other Determinants Influencing Household Participation in Micro-credit Groups in Uasin Gishu County, Kenya

This paper examined the social capital dimensions and other determinants influencing household participation and level of participation in micro-credit groups in Uasin Gishu County, Kenya specifically Moiben division. In the study area, the microfinance institutions and other lending organizations have extended credit facilities to households through individual and group lending schemes in their bid to increase household access to credit. However, even with the recent proliferation of micro-credit groups a considerable proportion of the poor households in the area have not joined micro-credit groups. A structured questionnaire was used to gather information from 174 households from the division, using the multistage sampling technique. Heckman selection model was applied to identify factors that influenced households to join and the level of participation in the micro-credit group. The results indicate that age, gender, education farm size, household size, farm income and distance to the nearest financial institution influenced household decision to join the micro-credit groups. On the other hand age, farm size, total income, heterogeneity index, density of membership, years of experience in group borrowing and decision making index significantly influenced the level of participation. Based on the findings policy implications were drawn for improving household access to credit in the study areas. Key words: Access to credit, group lending, social capital and Heckman selection mode

The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya

Lack of access to credit is a key obstacle for economic development of transitional economies such as Kenya. The underlying problem is related to information asymmetry combined with the lack of collateral by low income households. Microfinance led group lending model offer a new way to deal with this problem without resorting to collateral requirements. The core issue in group lending is that it systematically exploits elements of social capital that inherently exist in groups into an incentive contract that substitutes collateral; a formal bank conventional requirement of lending that is virtually unavailable to the poor. This study sought to ascertain the influence of social capital dimensions on households’ participation and repayment performance in micro-credit groups in the study area. The study was conducted in Moiben Division, Uasin Gishu County, Kenya based on a sample of 174 households selected using a multi-stage sampling technique. The data was collected using a personally administered structured questionnaire. In the analysis descriptive statistics, Heckman two stage and a Tobit regression models were employed. The results show that individual and group borrowers had significant differences in gender, age, farm size, years of education, income and land tenure. It was established that household size, farm income and distance to the nearest financial institution positively influenced a household to join micro-credit group. On the other hand age, gender, years of education, farm size and interest rate were found to be significant and negatively influenced household decision to join micro-credit groups. The level of household participation in micro-credit groups measured by the number of loan borrowings was significantly and positively influenced by age, total income, years of experience in group borrowing and decision making index while farm size, heterogeneity index and density of membership had a negative affect on household number of loan borrowings. Lastly, the results on group loan repayment performance using the Tobit model revealed that experience in group borrowing, number of visits by loan officer, peer pressure, meeting attendance index and heterogeneity index positively and significantly influenced loan default rate while gender, household size, distance to the nearest financial institution and density of membership were significant but negatively influenced household loan repayment performance. The study therefore recommends that MFIs should increase awareness and encourage poor households to form micro-credit groups. These institutions are obliged to provide training to households on group dynamics in order to take advantage of social capital existing within well organized and managed groups

Factors Influencing Profitability of Diversified Cash Crop Farming among Smallholder Tea Farmers in Gatanga District, Kenya

Small-scale farming account for about 75% and 55% of total agricultural production and marketed output respectively in Kenya. Cash crop farming is the main occupation of a majority of the farmers in central Kenya. However, with continued decline in the prices of traditional cash crops, horticultural crops have become an integral part of smallholder farms as a strategy to enhance farm incomes. It’s, however, not well documented as to whether this cash crop multiplicity has helped improve the economic welfare of these peasant farmers. The study aimed at determining whether diversified cash crop farming is more profitable than specialization in tea farming and also identify the factors influencing this profitability. The study revealed that diversified cash crop farming is at least 63% more profitable than specialization in tea farming.  Gender, farming experience, farm tools, farm size, credit, hired labour and the fertilizer and manure applied are the significant determinants. Keywords: profitability, smallholder, tea, horticulture, diversification, cash crop

Reverse Logistics Practices and Their Effect on Competitiveness of Food Manufacturing Firms in Kenya

Increased global warming and environmental degradation, has caused concern for governments, societies and business organizations even in Kenya. Kenya’s, manufacturing industry is one of the main contributors to economic growth. Unfortunately, it has also caused environmental deterioration. Consequently business managers have increasingly begun to realize the need to be environmentally accountable for their activities. Reverse logistics is a green supply chain management practice that enables companies to manage wastes and improve their competitiveness as their environmental efficiency is enhanced. This research aims to examine the relationship between reverse logistics and competitiveness of food manufacturing firms in Kenya. To fully understand this issue the research investigates the reverse logistics practices adopted by the various companies and then examines whether these practices have any effect on firm competitiveness of food manufacturers in Kenya. A cross- sectional survey was conducted among 130 food manufacturing firms that are listed in the Kenya Association of Manufacturers directory. The response rate was 73.8%. Primary data was collected through questionnaires. Factor analysis was used examine the construct validity while multivariate liner regression was employed to test criterion validity. The results of this research indicated that, the adoption of reverse logistics practices would enhance the competitiveness of Kenya’s food manufacturing firms. Further this study found that due to lack of awareness on the importance of sustainability, there is a low level of adoption of reverse logistics practices in Kenya. This study recommends that organizational managers should appreciate the environmental issues and adopt reverse logistics practices. This is important as it would curb waste, enhance cost savings thus increasing competitiveness. This study further recommends that the government and all stakeholders in the manufacturing sector should carry out public awareness campaigns on the importance of environmental conservation as it would encourage the locals to become active drivers towards the adoption of reverse logistics practices. Keywords: Green Supply Chain, Reverse Logistics, Firm Competitiveness, Food Manufacturing Firms, Keny