Effect of Credit Accessibility Cost of Non-Governmental Organization Agricultural Credit Facilitation on Food Security among Smallholder Farmers in Kenya

Abstract

Purpose: This study examined the effect of credit accessibility cost on food security among smallholder farmers in Kenya by focusing on disbursement costs, interest rates, transaction costs, collateral requirements, and credit processing costs. The study sought to determine how the affordability of credit influences farmers’ access to and utilization of agricultural credit, and the extent to which this enhances investment in farm production, acquisition of quality inputs, adoption of improved technologies, income generation, and ultimately household food availability, access, and consumption.

Methodology: The study adopted a cross-sectional descriptive survey design and collected primary data using structured questionnaires from a sample of 384 smallholder farmers selected through purposive and stratified proportionate sampling from a population of 417,494 farmers registered under One Acre Fund across seven counties. The Grameen joint liability model and Asymmetric Information theory underpin this study by explaining how credit accessibility costs influence food security among smallholder farmers. The theories posit that non-governmental organizations led group lending mechanisms reduce moral hazard, adverse selection, and transaction costs through peer monitoring, joint liability, and collective accountability, thereby enhancing affordable access to agricultural credit and strengthening household food security outcomes. A high response rate of 89.8% (n = 345) was achieved. Data were analysed by descriptive statistics, Spearman’s correlation, multiple regression, and factor analysis.

Findings: The study findings indicate that credit accessibility cost exerts a statistically significant influence on food security, underscoring the importance of affordable credit mechanisms in enhancing household food security among smallholder farmers. Affordable administrative costs were positively associated with children’s food availability (r = 0.162, p<0.01), suggesting that ease of credit access enhances household consumption. However, interest rates (r = -0.345, p < 0.01) and repayment costs (r = -0.228, p < 0.01) showed negative relationships, indicating that even relatively affordable borrowing costs can exert financial pressure and reduce food access. For adults, repayment flexibility demonstrated a positive association with food availability (r = 0.184, p < 0.01). Regression results further confirmed that credit cost significantly influences food security outcomes (R² = 0.070, F= 8.54, p< 0.05). Notably, 63.2% of farmers perceived credit costs as fair, while 53.3% considered them cheaper than those of commercial banks. The study concludes that non-governmental organizations led agricultural credit facilitation programs play a significant role in improving food security through enhanced access to affordable inputs, credit and social capital. However, high borrowing costs, limited financial literacy, and inconsistent access constrain effective credit utilization and scalability.

Unique Contribution to Theory, Practice and Policy: The study recommends enhancing credit literacy and financial management training among smallholder farmers to improve their capacity to effectively access, manage, and utilize agricultural credit; while promoting policy and institutional reforms that reduce credit accessibility costs and enhance the flexibility of agricultural financing mechanisms. The study also recommends further research to examine the influence of credit management factors, including borrowing capacity, loan utilization efficiency, repayment behavior, and lending conditions, on the effectiveness of agricultural credit interventions and their subsequent impact on food security outcomes among smallholder farming households.