Determinants of performance of loans of agrobased financial institutions: The case of agricultural finance corporation

Abstract

Agro based industry has been cited as major contributor in economic development in Kenya. As is the case in other developing countries, securing financing and attaining high loan performance remains a challenge. The Agricultural Finance Corporation (AFC) is mandated to provide financial support through loans in Agro-based businesses in the country. This research sought to determine the factors that determine loan performance in agro based financial institutions and used AFC as a case study. Factors such as age of borrower, bank balance, business relationship (personal, business and new customer), interest rate, loan size, loan type and gender of borrower, borrower education were analyzed to determine their relationship and impact on default. The study used binary Logit model for analysis due to the dichotomous nature of the dependent variable (Non-repayment). The study used a sample of 110 borrowers accounts randomly selected within the period of study