The role of rural finance in improving livelihoods of small scale farmers: A case study of SCC-Viagroforestry’s ‘Community Saving and Empowerment’ project in Nyando District, Kenya
Reducing poverty and improving livelihoods is a major concern for most governments in developing countries. Agriculture is the most common area of intervention for development agents in Kenya, because it supports majority of the rural poor. However, lack of financial services hampers the extent to which individuals can improve their livelihoods. Rural finance is geared towards provision of services to rural areas. SCC-Viagroforestry is a Swedish organisation working in the Lake Victoria basin in East Africa, with a mission to improve livelihoods of the rural poor. The organization has been promoting a village savings and loaning scheme under the project COSAVE (Community Savings and Empowerment) in Nyando District. Group members save their money jointly and access loans at an interest. However, there is no information on the actual impacts of this scheme on the livelihoods of the target group.
This study was conducted to be able to measure impacts of the scheme. The objectives of this study were to: assess how members raise money for saving in order to qualify for loans from the savings group sponsored by SCC-Viagroforestry; determine whether the savings and loaning project enhanced access to financial services and improved livelihoods of small scale farmers; and examine whether credit received by small scale farmers is used for income generating activities. The study population consisted of 2613 individual members in 101 savings groups. A sample size of 337 individual members in 30 groups of the SCC-Viagroforestry’s microfinance groups in Nyando District were selected for use in the study. The groups were sampled using stratified random sampling method. The strata were the five divisions in the District, with the contribution by each division to the sampled groups being proportionate to the total number of groups in that division. The individual respondents were randomly sampled from the members’ registers of the sampled groups per division. Primary data were collected using questionnaires, interview schedules, Focus Group Discussions and key informant interviews. Key informants included leaders of the savings groups and staff of Viagroforestry.
Secondary data were collected from Viagroforestry reports, university libraries, government reports, journals and internet. Qualitative data was organized by creating themes and patterns, and evaluating the usefulness of the information in the answered research questions. Quantitative data was analyzed using descriptive statistics such as means and percentages and presented in tables and charts.
The study found out that trading was the most important source of raising money for saving in the groups followed by sale of farm produce. Access to financial services improved as a result of the savings and loaning scheme. The services included provision of loans which members used to carry out various economic activities, hence improving their livelihoods. Majority of those who received credit used it for starting or expanding their businesses. Second most important use of the credit was farming activities like buying farm inputs.
The study concluded that trading was the most important economic activity in the study area. There were also general positive impacts arising from the savings and loaning activities. While majority used credit received for business, there was also wide use of credit on non income generating activities like school fees and medical care. The scheme mostly attracted women more than men. The study recommends that the scheme should be adjusted to allow for longer period of loan repayment.
There is need for more awareness to be created among the groups on the risks involved in handling huge sums of money in terms of security and fake money. Groups that have outgrown the scheme and are in need of bigger loans need to be linked to formal financial institutions. Groups need to have bank accounts for the security of amounts of money not issued out as loans. Trainings on enterprise development should be given priority given the important role trading plays in the study area. Training on importance of value addition of farm produce should be given focus since very few respondents invested in this. This is despite the fact that value addition would help them get more income from their farm produce.
Mutua, R.W. (2011). The role of rural finance in improving livelihoods of small scale farmers: A case study of SCC-Viagroforestry’s ‘Community Saving and Empowerment’ project in Nyando District, Kenya. Master’s Thesis. School of Environment and Earth Sciences. Maseno University.
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