ABSTRACT
The past two decades has witnessed high promotion of microfinance institutions by both the government of Kenya and non-governmental organizations which are targeting smallholder farmers. Despite increase in these microfinance institutions, coffee yield among smallholder farmers has remained low. This has negatively affected smallholder coffee farmers’ earnings from the coffee enterprise and also their economic wellbeing due to loss of income. Information on the impact of microfinance credit among smallholder coffee farmers in Tharaka Nithi County remains scanty and inconclusive. Therefore, the main objective of this study was to determine the impact of microfinance credit on coffee production among smallholder farmers in Tharaka Nithi County. Multi-stage sampling design was used to select the respondents. A total sample of 390 smallholder coffee farmers was used for this study. Structured questionnaires were used to collect data which was analyzed using descriptive statistics to characterize smallholder coffee farmers in the study area. Results showed that .The results on descriptive statistics show that coffee farming among small holder farmers is practiced by the old. Majority of the households were headed by men who had at least primary level. Majority of the farmers had at least primary level education with only 3.58 percent who had gone beyond secondary level. Majority of famers had well organized families with both husbands and wives present to help each other in farming. Coffee production in the area was practiced in small scale and out of the total farm size only a portion of it is used for coffee production. The results show that there are still a large number of farmers at 45 percent who are yet to embrace agricultural extension services in their coffee production. The findings revealed that 79% of coffee farmers require credit while 21% coffee farmers do not require it. Farmers who didn’t require credit revealed that high interest rates, lack of information on how to access credit, lack of collateral to secure the loan and the process of getting a loan being complicated as the main impediments that deter them from going for credit. Probit regression model was used to determine factors that influenced access to credit among smallholder coffee farmers. The results show that gender of the household head, coffee farming experience, number of coffee trees and access to microfinance credit had significant influence in making the decision on whether to take microfinance credit or not. Propensity score matching was used to determine the impact of microfinance credit on coffee production. Results showed an increase in coffee yields by 358.44 kilograms for caliper matching, 343.31 for nearest neighbour matching and 344.83 for kernel matching for farmers that used microfinance credit as compared to the non-users. This therefore implied that use of microfinance credit in coffee production among smallholder farmers had a positive significant impact on coffee yields. The study recommended concerted efforts by county and the national governments to come up with strategies that will focus on farmers training and ensure easy access to adequate credit to enhance coffee production among smallholder farmers.