Factors influencing uptake of banking services in rural centers for agricultural development: the case of Imenti North Sub County, Meru County, Kenya.

Abstract

More than 60% of the population in Africa resides in rural centers; despite this numbers financial access is at 43.7% in the urban centers and 21.3% in rural centers. The rural centers have shown tremendous economic growth with most of the raw materials needed in the urban centers coming from the rural centers. It has been reiterated by the Kenya Government that the backbone of our nation is agriculture. Our Gross Domestic Product has seen growth with records showing that Agriculture is a major contributor. Our rural centers are home to Horticultural farming, Floricultural farming, Animal farming, Agroforestry, fish farming, cash crops farming, subsistence farming and the all new agro-tourism. The stimulus for growth for this agricultural development is finance and in this case credit. Therefore financial inclusion of rural areas through banks is important to the economy. The banking sector in Kenya offers a number of products which include bank loans, bank accounts and payment services. Banking has seen the entry of savings societies which have transitioned to deposit- taking institutions and finally banks. This study sought to understand the factors influencing the uptake of banking services for agricultural development in rural centers, the case of Imenti North Sub County, in Meru County, Kenya. The objectives included: To determine the influence of availability of collateral, level of education, availability of agricultural investment opportunities and Government policy in the uptake of banking services for agricultural development in rural centers. The study adopted a descriptive survey research design and a stratified sampling technique was used to get the sample frame of the respondents; the research instruments used were open and close ended questionnaires and personal interviews. The findings of the study showed that more than 58.% of the respondents did not have collateral which is essential for the uptake of credit facilities, they had a high level of education which constituted more than 77% and more than 68% agreed that agricultural investment opportunities are available in the region; the study also shows that availability of collateral, level of education and availability of agricultural investment opportunities influence the uptake of banking services for agricultural development in rural centers. The study recommends that banking institutions should develop bank services that are sensitive to the lack of collateral or rather registered collateral in the rural centers, they should recognize agriculture as a source of income and appraise farmers with that in mind and they should invest in awareness for their products like payment services so that the public in the rural areas can use these services for agricultural development. The County and national Governments should provide alternative sources of credit for agriculture and they should provide training on other forms of agricultural investments like fishery, floriculture and agroforestry, so as to increase the agricultural investment opportunities in the rural centers up from the traditional ones.