The Characteristics of Lending Groups in Murang’a County, Kenya

Availability, accessibility and affordability of rural credit is one of the key elements for transforming rural economies through enhancing agricultural productivity, food security and poverty reduction. A good number of farmers in Murang’a County have engaged micro credit to boost maize production but the difference in productivity between beneficiaries and non beneficiaries have not been evaluated. This study sought to analyze the characteristics of lending groups in Murang’a County, Kenya. Descriptive and econometric analysis, were used to analyze the data. Primary data was collected from 200 respondents randomly selected from credit beneficially and non-beneficially groups in Kiharu constituency using a structured questionnaire.  The study uses the “counterfactual” approach using propensity score matching to assess whether households who had participated in microfinance services had increased their maize yield compared to non-participants. The results showed that the household head’s literacy level, primary activity, and market participation positively and significantly contributed to small-scale farmer’s access to credit. Majority indicated that they had access to credit, and for those who had accessed credit, their preferred source of credit were savings and credit institutions. The savings and credit institutions played a strong role in backstopping operations, providing standard policies and procedures, and co-branding subsidiaries in the network. They supported financial activities and handled funds intermediation, concentrated on agricultural services or joint production and also offered credit/ financial services to farmers. The study recommends that small-scale farmers can work together as a recognized legalized entity in order to improve their bargaining ability and to take advantage of economies of scale. Keywords: characteristics, lending groups, Murang’a County, Kenya