EFFECT OF AGRICULTURAL LAND RENTAL MARKET PARTICIPATION ON AGRICULTURAL INCOME OF SMALL SCALE FARMERS IN KWALE COUNTY, KENYA

ABSTRACT 

Kwale County has a vibrant agricultural land rental market due to its relative good climate and fertile soil. However, it is faced with several challenges including inefficiency use of resources such as land. There is evidence in Ethiopia and other parts of the world that participation in agricultural land rental markets can be a solution to solving food insecurity and land inequalities in Sub -Saharan Africa and the world at large. However, there are few studies which have been conducted in Kenya on agricultural land rental market. This study was conducted to fill this gap. The general objective of the study was to contribute to enhanced livelihood through improved effectiveness of agricultural land rental markets among small- scale farmers in Kwale County, Kenya. Specifically, it was to characterize the socioeconomic and institutional attributes of land rental market participants and to determine the socioeconomic and institutional factors influencing small scale farmer’s participation in the agricultural land rental market and its effect on agricultural income. A multi- stage sampling technique was used to obtain a sample size of 386 small scale farmers. Descriptive statistics, bivariate Probit, and a two stage Instrumental Variable approach were used in data analysis. Participants in land renting in were young (47 years), more educated and owned relatively small farms (2.05 acres) while the participants in renting out were relatively old (53 years), less educated and owned large pieces of land (8.08 acres). Transaction costs, access to extension services and ownership to oxen were the main determinants of land rental market participation. Finally, participation in agricultural land renting in had no significant influence on agricultural income. Therefore, the study recommends stakeholders to develop policies geared towards reduction in transaction costs and land rental prices. This could be through development in communication and road infrastructure to ease the access to information and agricultural land markets. There is a need for investment in the provision of affordable and quality formal education, up to date, relevant demand-driven extension services and low cost and readily available credit so as to encourage the participation in agricultural land rental market and increase agricultural income. There is also to heighten land equalization, policies that enhance reinvestment in agricultural assets such oxen, access to extension services and reduces transaction cost which is important in increasing the agricultural income of small scale farmers.

CHAPTER ONE 

INTRODUCTION 

Background information 

Land is critical to the economic, social and cultural development of many developing nations including Kenya. It is a central category of property in the lives of Kenyans. Moreover, it is a principal source of livelihood and material wealth as well as being culturally significant for many Kenyans. Consequently, its importance is recognized by various Government initiatives including the initial Poverty Reduction Strategy Paper (PRSP), political party manifestoes and the Economic Recovery Strategy for Wealth and Employment Creation 2003-2007 (Hermunen, 2004). Kenya has an area of approximately 582,646 (km2) comprising 97.8% land and 2.2% water surface. Only 20% of the land area can be classified as medium to high potential (suitable for arable agricultural) and the rest of the land is mainly arid or semi-arid (suitable for extensive livestock production, wildlife and irrigated farming (Siriba and Mwenda, 2013). Arable land in Kenya is increasingly becoming scarce due to a rapidly growing population and continuous land degradation. 

Purchasing land is clearly a limited option since not only are the procedures complex but there is also very little land available for sale. The system is fraught with institutional rigidities and other transaction costs that make land purchase procedures lengthy, cumbersome and expensive (Nyangena, 2010). In addition, most people are poor and face lots of financial constraints. An obvious result of this is the creation of new uncertainties and a proliferation of costly litigation matters (Njuguna and Baya, 2000). The above challenges associated with the land sales market have led to the emergence of a new trend of accessing land through both formal and informal land rental markets commonly referred to land leasing. Land leasing is the voluntary transfer of possession rights of land (the right of use) for a limited period of time. 

The leasing of land is very common in the Coast region of Kenya. The Coastal region is highly significant when it comes to the history of Kenya as a nation. This is especially because the Coast plays host to many resources both natural and manmade. These have since the colonial times elicited a lot of interest from government, citizens, tourists as well as investors keen to enjoy a piece of the rich heritage that abides in the area. On perceived or otherwise existing imbalances, the land question stands out as the most prominent and widespread problem at the coast. The main problem is access and ownership as often highlighted in various fora and the media. The majority of the population in this region are squatters and do not have ownership to the land (Ngatia, 2010). 

The Coast region of Kenya has experienced problems related to land since pre- independence Kenya. The coastal land was previously controlled by Swahili/Arabs until the British Colonized both Kenya and Tanzania. Since independence, the squatter problem has escalated due to rising populations, increased demand for land for agriculture and non- agricultural activities and the non-restriction of land-ownership in the country (Kanyinga, 1998). This has led to the emergence and growth of land markets in the Coast of Kenya. These markets have developed not only in the areas which are fertile and have high agricultural potential areas as in the case of Kwale County but also in other areas in the region. 

Land leasing can take two forms: cash rent and sharecropping. In cash rent lease, the farmer pays a fixed annual amount of money per acre of land and owns the entire produce. As a result, they supply their own inputs but may overuse any inputs provided by the land owner, including the un-priced land attributes. In crop share lease, the farmer does not pay any fee for use of the land but simply pays a predetermined share of the harvest of the crop to the land owner at the time of harvest (Nyangena, 2010). Land rental markets offer several advantages. First, leasing arrangements can enhance efficiency by allowing gains from specialization. Second, renting land requires less liquidity or access to credit. With credit imperfections in Kenya and other developing countries, this is an important consideration for poor rural households. Lastly, leasing contributes towards reducing inequality in land holdings and facilitating access to land for poorer households. The division of ownership and use, however, may create potential incentive problems for both landlords and tenants regarding optimal maintenance and use of the property (Nyangena, 2010). 

The prime importance of land as an important factor of production calls for policies and laws to govern its management and use. In Kenya, agricultural land use is mainly guided by The Constitution of Kenya (2010), The Land Control Act, Chapter 302, The County Government Act, Chapter 265 and The Physical Planning Act, Chapter 286, Laws of Kenya. Land policy is a set of socio-economic, legal, technical and political measures that dictate the manner in which land and benefits accruing from land are allocated, distributed and utilized (Njuguna and Baya, 2000). In Kenya, there are numerous laws and statutes governing the leasing of land including the Indian Transfer Act (1882), the Registered Land Act (Cap 300) and the customary law system. The Government Lands Act as one of the first land policies was enacted about 70 years ago, and it is the statute under which all land in Kenya is administered apart from trust land or plots of land with freehold title which is registered in the name of an individual or a body corporate. 

Land legislations in Kenya have over the years given rise to three types of land tenure systems categories. These are private, customary and public tenure systems. The land laws gave prominence to private land over indigenous/communal land. The current constitution and subsequent land laws recognize indigenous/communal land and consequently categorize land into public, community and private land and these are in the ratios of 10%, 70% and 20%, respectively (Siriba and Mwenda, 2011). Public land is the land that was formerly crown land that is now held by the government, for example, army barracks, forest lands, national parks, game reserves, wetlands, riparian reserves and protected areas. Trust land is the land held by the local authorities (county governments) on behalf of the people ordinarily resident in their areas of jurisdiction. Trust land includes un-adjudicated land in the rural areas, rural markets and rural public schools. Private land is land held by individual persons or legal persons like private companies and co-operative societies after alienation from government land or adjudication from trust lands (NLC Act, 2012). 

Along the coastal strip and the coastal uplands, the land is mainly owned by absentee landlords, leading to the squatter settlement problem. The trust and government land within these areas have since been adjudicated and government settlement schemes established. In the drier areas of the Nyika Plateau in Kinango, Kasemeni, Samburu, Ndavaya and some parts of Lunga Lunga Constituency, the land is held in trust and under group ranches. Land is viewed as a communal asset where every member of the community has the right to use it. In most areas adjudication has not yet been done thus land is still held under the group ranch. Most of the group ranches currently are non-functional and this has resulted in unplanned human settlements in the land. The land is also used for small-scale farming, mining, quarrying as well as settlements (KCIDP, 2013). 

Statement of the problem 

Access to land even if only through use rights has implications for effective utilization of resources and improved food security. Kwale County has had challenges of poor land tenure systems and unequal distribution of land ownership, thus in their quest to access land for agricultural activities, rural households have over the years participated in agricultural land markets particularly in land rental markets. Agricultural land rental markets have potential benefits such as improve the access to agricultural land, food and increase efficiency and agricultural income. Despite the potential positive effects posed by participation in agricultural land rental markets, the market is still emerging amidst the existing land issues in Coastal region of Kenya. In addition, there is still inadequate literature in developing countries on drivers of agricultural land rental markets participation, particularly in regions that still experiences land injustices. In light of the low incidence of participation in land rental market, empirical evidence on its drivers is needed by policy makers and local government on modalities of spurring the sector. From the foregoing, the objective of this study is to provide empirical evidence on drivers of smallholder participation in agricultural land rental markets in regions still experiencing historical land injustices in Kenya. 

General Objective 

The general objective was to contribute to enhanced livelihood through improved effectiveness of agricultural land rental markets among small-scale farmers in Kwale County, Kenya. 

Specific objectives 

1. To characterize the household socio-economic and institutional attributes of agricultural land rental market participants. 

2. To determine the socioeconomic and institutional factors influencing participation in agricultural land rental market. 

3. To determine the effect of renting in agricultural land on agricultural income. 

Research questions 

1. What are the household socio-economic and institutional attributes of agricultural land rental market participants? 

2. What are the socioeconomic and institutional factors influencing participation in agricultural land rental market? 

3. Does renting in of agricultural land have an effect on agricultural income? 

Justification of the study 

Due to the scarcity of land, unavailability of well-defined property rights and differences in the efficiency of land use, agricultural land rental markets have progressively been developing over the years. The development of such markets has not been smooth. It has been faced with various challenges such as high transaction costs, inadequacy of credit due to poor collateral (McClung, 2013). The markets, however, have had a remarkable impact on the agricultural income and on the society in general. Due to the informal nature of the market in most of the areas in sub-Saharan Africa, few studies had been conducted to document its impact on agricultural income (Nyangena, 2010), thereby creating an information gap. In addition to that, this research was informed by a study by Jin and Jyne (2013) that recommended further research on the constraints affecting land rental markets and impact of the rental markets on agricultural income. 

As noted by Nyangena (2010), much of the policy focus, often under pressure from donors such the World Bank has been on the encouragement of land sales markets, while land rental markets are more likely to play an important, and positive, role at present. Hence, rental markets should not be considered a side issue in the discussion of land markets, but instead should be a focal point of attention. Therefore, determination of impact of agricultural land rental market participation on agricultural income helps in the enhancement of better utilization of high and medium potential lands by farmers, hence helping the achievement of Vision 2030 Economic pillar of achieving economic growth of over 10% and sustaining it for over 25 years (GoK, 2007). This was achieved by focussing more on agriculture whose expected transformation under the pillar is to promote an innovative, commercial-oriented and modern agricultural sector through, among others, the introduction of land use policies. 

Determination of effect of participation on livelihood assists in achieving the Sustainable Development Goal on ending hunger achieves food security and improved nutrition and promotes sustainable agriculture thereby enhancing efficient land market participation by small-scale farmers (UNDP, 2015). The study has generated imperative information which improves the understanding of households’ participation in agricultural land rental markets and its effect on agricultural income. Further, the information helps rural development planners and policy makers in setting priorities for enhanced agricultural land rental markets to help improve the livelihood of small-scale farmers in Kwale County. 

Scope and limitation of the study 

The study determined the effect of participation of small-scale farmers in agriculture land rental markets on agricultural income in Lunga Lunga Constituency, Kwale County. Illiteracy and inadequacy of properly kept records affected the accuracy of the estimates and hence the study heavily relied on farmer’s ability to recall information. This study was also restricted to small-scale farmers. Climatic, topography and technological factors were not considered in this study. 

Operational definition of terms 

Livelihood- Refers to means of securing the basic necessities of life such as food, water, shelter and clothing. 

Household- Refers to a social unit composed of people who live together in the same dwelling. 

Small scale farmer-Refers to farmer who resides at Lunga Lunga Constituency and owns not more than 10 acres of land. 

Market participation- It is the renting in, autarky or renting out of agricultural land. 

Renting in- Refers to the act of hiring in agricultural land from a landlord. 

Renting out- Refers to the act of hiring out agricultural land to a tenant. 

Autarky- Refers to neither renting in nor renting out agricultural land. Land market- The interaction between tenants and landlords of agricultural land. Agricultural income- All income gained from agricultural activities such as crop and animal production.

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Item Type: Kenyan Topic  |  Size: 55 pages  |  Chapters: 1-5

Format: MS Word  |  Delivery: Within 30Mins.

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