INFLUENCE OF CONTRACT FINANCING ON INCOME GROWTH AMONG POULTRY FARMERS IN KIAMBU COUNTY

Abstract

The recent growth in contract farming schemes particularly in developing countries has sparked controversy over its economic and welfare impacts on participating smallholders. Thus, this study empirically examined the influence of contract financing on income growth among poultry farmers in Kiambu County. More specifically the study examined the influence of capital, advance pricing, contractor credit services and veterinary services on income growth among poultry farmers in Kenya. Theories underpinning this study included; Agency Theory, Efficient Market Hypothesis and Center - Periphery Theory, the researcher used descriptive research method. The target population for this study was 60 contract farmers in Kiambu County. Primary data was used which was collected using structured questionnaires. Data was analyzed in form of descriptive (frequencies, percentages, means and standard deviations) and inferential statistics (chi-square, correlation analysis and regression analysis) with an aid of SPSS as a tool for analysis. The research findings were presented in statistical tables. The findings indicate there exist statistically insignificant, positive causal relationship between capital and income growth among poultry farmers according to joint regression model coefficients results (β = 0.014, p > 0.05), advance pricing has significant positive influence on income growth among poultry farmers based (β = 0.504, p<0.05). Contractor credit services have a significant influence on income growth among poultry farmers, as evidenced by the statistically significant positive relationship as shown in the overall regression model (β = 0.326, p<0.05). There exist statistically significant, positive causal relationship between veterinary services and income growth among poultry farmers (β = 0.662, p<0.05). It was concluded that chicks provided to farmers by Kenchic as initial capital are a key pillar in enhancing farmers’ engagement in contract farming. Continuous compensation for sudden chicks’ death Syndrome or immature death of chicks has also been a motivating factor that has enhanced loyalty among farmers towards contractual poultry farming with Kenchic. Contract finance helps in shifting of price risks to processors among poultry farmers acting as a good hedge against price fluctuation uncertainties. Credit facilities guaranteed by contracting firms have favorable terms since they do not attract interest costs during the actual payment for services. It was recommended that the management of Kenchic should put in place a strategy where of Pan Feeders, automatic drinkers and chick drinkers are provided to poultry farmers. This will cushion farmers on costs of buying these items thus minimizing their overheads and hence increasing their income level. It is recommended that there should be a renegotiation between the contractor and the financial institutions that advance credit facilities to farmers on the guarantee by Kenchic. The renegotiation will ensure that some bottlenecks are addressed including repayment terms since a fair majority of respondents held the opinion that penalties charged in case of delayed payment of credit facilities are not realistic.