Technological Factors and Utilization of Formal Financial Services by Smallholder Farmers in Kenya

Abstract

Financing agriculture has become a critical service in enabling the full realization of the agricultural sector’s potential. The allocative efficiency of financial services provided by financial institutions in Africa to the agricultural sector remains low. Further, several institutions aimed at facilitating small holder farmers’ access to credit have failed to deliver it at the right time and in the right proportions. Nevertheless, in the advent of new financial regimes and innovations such as financial technology, the uptake and utilization of financial services among the small holder farmers in Kenya was expected to increase. This, however, has not been the case. Hence this study which sought to determine the influence of technological factors on the utilization of formal financial services among small holder farmers. The target population for this study was small holder farmers from Nakuru, Busia and Kirinyaga Counties in Kenya. A study sample size of 496 small holder farmers was obtained through purposive and stratified random sampling techniques. Data was collected using researcher developed questionnaire. Quantitative data was analyzed using multiple linear regression analysis with the aid of stata. The findings revealed that technological factors did not have any significant effect on utilization of formal financial services among small holder farmers. This was because the farmers were yet to appreciate and fully take advantage of technology enabled financial services to increase their levels of inclusion. From the findings of the study, the recommendations were that at the national level, policy makers should encourage more investment in the digitalization of small scale farming activities so as to encourage more technology adoption.