Farming projects funded using Agricultural Finance Corporation (AFC) capital are successful due to input of effective and efficient decisions. Farmer decisions have been observed to affect the loan default rate. The default rate for these loans has been reported to be 20.33%, which by standards is high since the yardstick for all types of loans in Kenya is 10%. This study aimed at establishing the influence of enterprise decision making on AFC loan default rate in Mount Kenya Region. Descriptive research design was used to study a population of 3,002 agribusiness borrowers in the 11-branch network region. Using systematic random sampling with an interval of 10, a sample of 300 respondents was obtained. Primary data on enterprise decision making was collected using a structured questionnaire. Statistical Packages for Social Sciences (SPSS V.27) and Stata version 15 was used to analyse data. To establish the effect of variables in estimating default rate, regression analysis was utilized. F-statistic was derived by performing ANOVA. The econometric model that was used to specify the statistical relationship between the independent variable and AFC loan default was binary logistic regression which showed that the all the four indicators of enterprise decision making that were used in the model explained 36.98% of AFC loan default rate. Results of the study revealed that agricultural enterprise diversification was significant at 5% while implementation of purposed project, land size and land use dynamics were significant at 10%, 5% and 1% levels of significance. Agricultural enterprise diversification and implementation of purposed project were found to have 7.6% and 6% associations with default respectively. In mitigation of default, borrowers should make decisions of using good agricultural practices of enterprise diversification and avoid diverting their loans to non-agribusiness projects. They should also make decisions on reasonable landholding which should be engaged in production while paying attention to dynamics of land use in regard to parcel purposes and consolidation. Farmers may utilize the output of this study to make effective and proficient decisions about good agricultural practices that are motivated by integration of credit into farming. The study recommends resource use-efficiency by encouraging borrowers to adopt land use and credit use strategies, use effective farming technologies, adopt risk mitigation through insurance schemes and form common interest groups to tap the dynamic externalities of grouping.
| Published in | International Journal of Economic Behavior and Organization (Volume 11, Issue 2) |
| DOI | 10.11648/j.ijebo.20231102.16 |
| Page(s) | 96-106 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2023. Published by Science Publishing Group |
AFC Loan, Default Rate, Enterprise, Enterprise Decision Making, Repayment
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APA Style
M’Muruku Salesio Miriti, Gathungu Geofrey Kingori, Mwirigi Rael Nkatha. (2023). Influence of Enterprise Decision Making on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region. International Journal of Economic Behavior and Organization, 11(2), 96-106. https://doi.org/10.11648/j.ijebo.20231102.16
ACS Style
M’Muruku Salesio Miriti; Gathungu Geofrey Kingori; Mwirigi Rael Nkatha. Influence of Enterprise Decision Making on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region. Int. J. Econ. Behav. Organ. 2023, 11(2), 96-106. doi: 10.11648/j.ijebo.20231102.16
AMA Style
M’Muruku Salesio Miriti, Gathungu Geofrey Kingori, Mwirigi Rael Nkatha. Influence of Enterprise Decision Making on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region. Int J Econ Behav Organ. 2023;11(2):96-106. doi: 10.11648/j.ijebo.20231102.16
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Download@article{10.11648/j.ijebo.20231102.16,
author = {M’Muruku Salesio Miriti and Gathungu Geofrey Kingori and Mwirigi Rael Nkatha},
title = {Influence of Enterprise Decision Making on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region},
journal = {International Journal of Economic Behavior and Organization},
volume = {11},
number = {2},
pages = {96-106},
doi = {10.11648/j.ijebo.20231102.16},
url = {https://doi.org/10.11648/j.ijebo.20231102.16},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20231102.16},
abstract = {Farming projects funded using Agricultural Finance Corporation (AFC) capital are successful due to input of effective and efficient decisions. Farmer decisions have been observed to affect the loan default rate. The default rate for these loans has been reported to be 20.33%, which by standards is high since the yardstick for all types of loans in Kenya is 10%. This study aimed at establishing the influence of enterprise decision making on AFC loan default rate in Mount Kenya Region. Descriptive research design was used to study a population of 3,002 agribusiness borrowers in the 11-branch network region. Using systematic random sampling with an interval of 10, a sample of 300 respondents was obtained. Primary data on enterprise decision making was collected using a structured questionnaire. Statistical Packages for Social Sciences (SPSS V.27) and Stata version 15 was used to analyse data. To establish the effect of variables in estimating default rate, regression analysis was utilized. F-statistic was derived by performing ANOVA. The econometric model that was used to specify the statistical relationship between the independent variable and AFC loan default was binary logistic regression which showed that the all the four indicators of enterprise decision making that were used in the model explained 36.98% of AFC loan default rate. Results of the study revealed that agricultural enterprise diversification was significant at 5% while implementation of purposed project, land size and land use dynamics were significant at 10%, 5% and 1% levels of significance. Agricultural enterprise diversification and implementation of purposed project were found to have 7.6% and 6% associations with default respectively. In mitigation of default, borrowers should make decisions of using good agricultural practices of enterprise diversification and avoid diverting their loans to non-agribusiness projects. They should also make decisions on reasonable landholding which should be engaged in production while paying attention to dynamics of land use in regard to parcel purposes and consolidation. Farmers may utilize the output of this study to make effective and proficient decisions about good agricultural practices that are motivated by integration of credit into farming. The study recommends resource use-efficiency by encouraging borrowers to adopt land use and credit use strategies, use effective farming technologies, adopt risk mitigation through insurance schemes and form common interest groups to tap the dynamic externalities of grouping.},
year = {2023}
}
TY - JOUR T1 - Influence of Enterprise Decision Making on Agribusiness Loans Default Rate in Agricultural Finance Corporation, Mount Kenya Region AU - M’Muruku Salesio Miriti AU - Gathungu Geofrey Kingori AU - Mwirigi Rael Nkatha Y1 - 2023/06/09 PY - 2023 N1 - https://doi.org/10.11648/j.ijebo.20231102.16 DO - 10.11648/j.ijebo.20231102.16 T2 - International Journal of Economic Behavior and Organization JF - International Journal of Economic Behavior and Organization JO - International Journal of Economic Behavior and Organization SP - 96 EP - 106 PB - Science Publishing Group SN - 2328-7616 UR - https://doi.org/10.11648/j.ijebo.20231102.16 AB - Farming projects funded using Agricultural Finance Corporation (AFC) capital are successful due to input of effective and efficient decisions. Farmer decisions have been observed to affect the loan default rate. The default rate for these loans has been reported to be 20.33%, which by standards is high since the yardstick for all types of loans in Kenya is 10%. This study aimed at establishing the influence of enterprise decision making on AFC loan default rate in Mount Kenya Region. Descriptive research design was used to study a population of 3,002 agribusiness borrowers in the 11-branch network region. Using systematic random sampling with an interval of 10, a sample of 300 respondents was obtained. Primary data on enterprise decision making was collected using a structured questionnaire. Statistical Packages for Social Sciences (SPSS V.27) and Stata version 15 was used to analyse data. To establish the effect of variables in estimating default rate, regression analysis was utilized. F-statistic was derived by performing ANOVA. The econometric model that was used to specify the statistical relationship between the independent variable and AFC loan default was binary logistic regression which showed that the all the four indicators of enterprise decision making that were used in the model explained 36.98% of AFC loan default rate. Results of the study revealed that agricultural enterprise diversification was significant at 5% while implementation of purposed project, land size and land use dynamics were significant at 10%, 5% and 1% levels of significance. Agricultural enterprise diversification and implementation of purposed project were found to have 7.6% and 6% associations with default respectively. In mitigation of default, borrowers should make decisions of using good agricultural practices of enterprise diversification and avoid diverting their loans to non-agribusiness projects. They should also make decisions on reasonable landholding which should be engaged in production while paying attention to dynamics of land use in regard to parcel purposes and consolidation. Farmers may utilize the output of this study to make effective and proficient decisions about good agricultural practices that are motivated by integration of credit into farming. The study recommends resource use-efficiency by encouraging borrowers to adopt land use and credit use strategies, use effective farming technologies, adopt risk mitigation through insurance schemes and form common interest groups to tap the dynamic externalities of grouping. VL - 11 IS - 2 ER -
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