The Influence of Loan Rescheduling and Flexible Credit Limits on Poverty Reduction among Small holder Farmers in Muthetheni Ward of Machakos County in Kenya

Abstract

The purpose of the study was to evaluate the influence of loan rescheduling and flexible credit limits on poverty reduction among smallholder farmers in Machakos County, Kenya. The study applied a descriptive cross-sectional survey design where structured questionnaires were utilized to collect quantitative data from households of Muthetheni Ward, Mwala Subcounty, Machakos County, Kenya. The study adopted random cluster sampling to select households that had taken an agricultural loan from microfinance institutions or development finance institutions in the preceding two years. Statistical package for social sciences (SPSS) was utilized to derive the regression model for the study. The study findings indicated that loan rescheduling had a significant positive influence on poverty reduction among smallholder farmers in Machakos County, Kenya (β = 0.611, p < 0.05). The findings however, indicated that flexible credit limits had no significant influence on poverty reduction among smallholder farmers in Machakos County, Kenya (β = 0.059, p = 0.352). The study recommends to microfinance and development finance institutions to offer a variety of flexible loan products to smallholder farmers that suit the farmer’s needs and characteristics. Regarding loan rescheduling, microlenders should seek to balance between assisting the farmers to repay the loan and the risk inherent in any rescheduled loan.