ABSTRACT
The livestock sector is an important component of the Kenyan economy and contributes about 40% of the agricultural Gross Domestic Product (GDP) which is about 10% of the national GDP. Dairy farming sub-sector plays a very significant role in the development of the Kenyan economy due to its impact on the GDP, alleviation of poverty, food security, employment creation and provision of raw materials to milk processors. Over 70% of the dairy farmers in Kenya are smallholders. Lack of credit services has been known to constrain agricultural development among the smallholder farmers in developing countries. Microfinance aims at providing the needed credit services to smallholder farmers. Smallholder farmers in Longisa sub-county, Bomet County have accessed microfinance services since the 1990s. However, the dairy production has been far below the expected potential in the area. The study used a cross sectional survey research design because it allows researchers to collect data from a large sample and to use it in intensive analysis. The smallholder dairy cattle farmers constituted the respondents of the study. A proportionate stratified random sampling method was used to ensure each location was represented. Simple random sampling was used to select 152 respondents for study. The questionnaire used to collect data was developed by the researcher and validated by experts in applied community development. The research instruments were pilot tested to determine the reliability of the instrument in Bomet Central sub-county which neighbours Longisa sub-county. Stratified random sampling was used to select the pretest sample size of 30 smallholder dairy farmers. Using Cronbach's alpha, an index of 0.92 for the questionnaire was established. This implied that the reliability of the instrument was good. Descriptive statistics as well as inferential statistics technique were used to analyse data with the help of Statistical Packages for Social Sciences (SPSS version 20). Simple linear regression was used to determine the influence of the amount of credit accessed on the amount of milk produced. Ordered logistic regression was used to determine the influence of the amount of credit accessed on the breeds kept and animal husbandry while simple linear regression and ordered logistic were used to determine the influence of the amount of credit accessed on the training received by smallholder dairy farmers. To make reliable inferences from the data, all statistical tests were verified at α = 0.05 level of significance. The study revealed that the amount of microfinance credit accessed by smallholder in dairy farming have a significant and positive influence on the amount of milk produced per cow per lactation, the breeds of cattle kept as well as animal husbandry practices in the study area. This study recommends that smallholder dairy farmers should embrace microfinance credit in financing their dairy farming for them to realize higher milk yields. Farmers should also take advantage of the available and upcoming microfinance institutions in their effort to obtain the necessary finances for breed improvement and animal husbandry practices.
CHAPTER ONE
INTRODUCTION
Background Information
A smallholder dairy farmer is one with an average farm size less than two hectares of land and whose primary source of income is dairy farming and depends primarily on household members for labour. Smallholder dairy farmers operate less than two hectares of land under dairy and have low resource base (World Bank, 2003). According to Narayan and Gulati (2002) smallholder dairy farmer as those practicing a mix of commercial and subsistence farming or either, where the family provides the majority of labour and the farm provides the principal source of income.
Agriculture is the main driver of the Kenyan economy contributing about twenty five percent (25%) of the Gross Domestic Product (GDP). The sector provides over eighty percent (80%) of employment and sixty percent (60%) of the national income (Ministry of Agriculture, 2010). Eighty percent (80%) of the Kenyan population live in the rural areas and derives their livelihoods from the sector. One of the major subsectors of agriculture is livestock that contributes forty percent (40%) of the agricultural Gross Domestic Product (GDP) which is equivalent to ten percent (10%) of the national GDP.
Livestock sector mainly constitute dairy, poultry, apiculture and aquaculture farming. Dairy farming in Kenya plays a key role in food security, creation of employment, generation of incomes and enhancement of livelihoods of farmers, traders, processors and other individuals engaged in the entire dairy value chain (Muia, Kariuki, Mbugua, Gachuiri, Lukibisi, Ayako & Ngunjiri, 2012). The dairy farming is the largest contributor of the livestock GDP (Muriuki, 2011). The Kenya National Bureau of Statistics, KNBS (2010) estimates that 3.4 million heads of dairy cattle produce approximately 3.1 billion litres of milk per year. Smallholder farmers dominate the dairy farming industry in Kenya where they own about eighty percent (80%) of the total dairy herd (Government of Kenya, 2012). There are about 1.5 million milk-producing households who account for about eighty five percent (85%) of the annual total milk production (Muriuki, 2011). The factors that have promoted a major shift in dairy technology leading to shifts towards a more market oriented smallholder dairy production include suitable climate, improved fodder technology, improved dairy cattle populations, rising urban populations and incomes as well as high consumption of milk and other dairy products (Muia et al., 2012).
Kenya is said to be self-sufficient in dairy production (Muriuki, 2011). However, Rosegrant, Cline, Susler, and Valmonte-Santos, (2005) projected that by 2025, the demand for milk and other dairy products will increase by twenty five percent (25%) in developing countries. This is attributed to high human population growth, increased urbanization, high disposable incomes and increasing opportunities for the domestic and export markets. Kenya has the potential to meet her own domestic demand by increasing the production (Cherono, 2005). There is need to exploit this opportunity through improvement in specialized dairy cattle population, intensifying use of inputs, value addition to milk and other dairy products as well as improving linkages for sale of milk and acquisition of inputs (Muia, et al., 2012).
After the liberalization of dairy industry in the 1990s (Technoserve, 2008), the dairy sector in Kenya suffered a major blow in which farmers were forced to pay for services that were initially not charged and also the control of milk prices was left to a free economy (Muriuki, 2011). In addition to this, budgetary constraints as well as the socio-economic crisis of the late 1970s and early 1980s forced the Kenyan government to decontrol the milk prices thus liberalizing the industry (Ngigi, 2002). The reforms in the dairy sector included sale of veterinary drugs to enhance cost recovery, liberalization of feed markets and control of prices thereof, transfer of the management of cattle dips to the local communities, privatization of Artificial Insemination (AI) and clinical services (Omiti, 2002). Thus, farmers had to look for alternative sources of funding from both mainstream banks and Microfinance Institutions (MFIs) so as to finance these services.
Microfinance institutions have made considerable progress in providing the much needed credit and savings facilities for the smallholder farmers thereby growing in terms of number of organizations, clients and donor funding (Duvendack, Palmer-Jones, Copestake, Hooper, Loke & Rao, 2011). The smallholder farmers have thus, been able to build strong microenterprises, increase their incomes and subsequently participate more in economic growth and development (North, 2012). Additionally, the MFIs have tried to develop products that are responsive to cash flow cycles and marketing relationships of farming communities (Duvendack, et al., 2011). MFIs have made considerable efforts in ensuring that the number of people living below poverty line has reduced globally (North, 2012).
In Kenya, microfinance covers a wide array of institutions which include the indigenous rotating savings and credit associations (RoSCAs), self-help groups, financial savings and credit cooperatives (SACCOs). MFIs also include non-bank financial institutions (NBFIs) such as credit NGOs (Seibel, 2007). In some occasions, they may also include moneylenders (shylocks) as well as private deposit collectors. These institutions have been seen as an avenue to break the cycle of poverty which affects about half of the Kenyan population (Karugu & Kanyagia, 2007). The institutions offer financial services, education and trainings to the farmers in a bid to improve their capacity.
Dairy farming is among the key drivers of the economy of Longisa sub-county, Bomet County. The area has a favourable climate for dairy farming indicated by medium altitude and high rainfall evenly distributed throughout the year. Dairy cattle, mainly improved local breeds are the main species of livestock kept for milk and other dairy products (Ministry of Kenya, 2005). Several MFIs have been in operation in Bomet County since 1990s which offer credit services to farmers. For instance K-Rep began operating in the county in 1999 with initial two branches in Ndanai, and Makimeny ward but has thus far expanded to the entire county.
Agricultural Finance Corporation (AFC), Faulu Kenya, Equity Bank, Kenya Women Finance Trust (KWFT), Trans National Bank and Kenya Commercial Bank (KCB) are among the established financial institutions which have operated in the county for over five (5) years. Some of the financial programmes available in the study area include Kenya Agricultural Productivity Programme (KAPP), Njaa Marufuku Kenya, Youth Enterprise Fund, Uwezo Fund and Women Enterprise Fund.
Additionally, cooperatives such as Kenya Cooperative Creameries (KCC), Kenya Farmers Association (KFA) and Savings and Credit Cooperatives (SACCOs) as well as agribusiness processors also offer microfinance credit services to farmers in the county (Government of Kenya, 2010). For example Sot Savings Association (SSA) has been in operation since 2012 and offers inputs as well as credit to its registered members within Bomet County.
The credit accessed is utilized in dairy farming through financing AI services for breed improvement, purchasing of feeds, expanding the land area under dairy farming and in value addition. However, there is limited information on the extent to which the microcredit accessed from the MFIs in the County has influenced the dairy farming. This is because the industry is still predominated by low milk production and limited diversification in terms of breeds of cattle reared. Additionally, there is very minimal value addition on milk with majority of it (58%) being sold directly to consumers at the household level in raw form (Government of Kenya, 2010).
Statement of the Problem
Smallholder dairy farmers find it hard to access credit from the formal financial service providers. Dairy farming is practiced in the rural areas where it is mainly used as a poverty reduction strategy. The study area is characterized with continued decline in annual milk production. The area produces an average of 1200 litres against a potential of 4000-6000 litres per cow per lactation as realized in other countries like United States. In addition, there is continued keeping of local breeds and low use of AI services for breed improvement in the study area. Although farmers’ participation in microfinance can help in improving milk production per cow per lactation as well as dairy breeds and adoption of better animal husbandry practices, this potential has not been adequately harnessed in the study area despite the existence of these institutions for now over 20 years. Microfinance is seen as one avenue of promoting dairy farming through provision of credit, education and trainings hence helping in alleviating poverty. Microfinance can be an important toolkit in providing social change and improving the livelihoods of smallholder dairy farmers through improved farming. It is therefore necessary to urgently find out the influence of smallholder dairy farmers’ participation in microfinance on dairy farming in Longisa sub-county, Bomet County.
Purpose of the Study
The purpose of this study was to investigate the influence of smallholder dairy farmers’ participation in microfinance on dairy farming in Longisa sub-county, Bomet County, Kenya.
Objectives of the Study
There were five objectives in this study:
i) To identify the number of smallholder dairy farmers who borrow from microfinance institutions in Longisa sub-county, Bomet County.
ii) To determine the influence of the amount of credit accessed on the amount of milk produced per cow per lactation by smallholder dairy farmers in Longisa sub-county, Bomet County.
iii) To establish the influence of the amount of credit accessed on the breeds of cattle kept by smallholder dairy farmers in Longisa sub-county, Bomet County.
iv) To determine the influence of the amount of credit accessed on animal husbandry practices in dairy farming among smallholder dairy farmers in Longisa sub-county, Bomet County.
v) To determine the influence of the training received on dairy farming practices by smallholder dairy farmers in Longisa sub-county, Bomet County.
Hypotheses of the Study
The study hypotheses were as follows:
Ho1 The amount of credit accessed has no influence on the amount of milk produced per cow per lactation by smallholder dairy farmers in Longisa sub-county, Bomet County.
Ho2 The amount of credit accessed has no influence on the breeds of cattle kept by the smallholder dairy farmers in Longisa sub-county, Bomet County
Ho3 The amount of credit accessed has no influence on animal husbandry practices in dairy farming among smallholder dairy farmers in Longisa sub-county, Bomet County.
Ho4 The training received by smallholder farmers has no influence on dairy farming practices in Longisa sub-county, Bomet County.
Significance of the Study
The results generated from this study may be useful in understanding how smallholder dairy farmers’ participation in microfinance influence the dairy farming in the study area and how this study can be replicated in other parts of their operations. It may also be helpful to policy makers in government and NGOs as they may understand whether the credit accessed has been used to improve or retrogress the dairy farming in Longisa sub-county, Bomet County and the country at large. This study may add to the existing body of knowledge on microfinance and dairy farming. The findings of the research will be published in agricultural research journals thus contributing to knowledge and reference materials in libraries across the world. Finally, the findings may be useful to other researchers through the recommendations for further research made based on the findings.
Scope of the Study
The study focused on the influence of smallholder dairy farmers’ participation in microfinance on dairy farming. It also identified dairy farmers who borrow credit, looked at the amount of credit accessed and training received by smallholder farmers on dairy farming only. Aspects of dairy farming studied were amount of milk produced per cow, breeds of dairy cattle, feeds, housing structures and veterinary services. The study focused on dairy cattle only. The study was restricted to Longisa sub-county where Cheboin, Kapkimolwa, Kimuchul, Kiplabotwa, Kipreres, Tegat, Kembu and Chemaner locations were studied. Only smallholder dairy farmers were included in the study.
Assumptions of the Study
The following assumptions were made:
i) The dairy cattle were in healthy condition and that the milk production was not affected by outbreak of diseases.
ii) The smallholder dairy farmers in Longisa keep indigenous, exotic and cross breeds (herds).
Limitations
The study was limited by the poor record keeping due to high levels of illiteracy among the smallholder dairy farmers in the study area. However, the researcher employed probing technique to ensure accuracy of the production information given. This made the process of data collection hard.
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Item Type: Kenyan Topic | Size: 82 pages | Chapters: 1-5
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