Effect of financial access, financial literacy and risk management on the extent of participation in dairy farming in Kiambu County, Kenya

Abstract

Participation in dairy farming plays a vital role in improving household income, enhancing food security and promoting rural economic development in Kenya. However, farmers’ participation remains uneven despite the expansion of financial institutions and agricultural support services. This study examined the effects of access to financial products, financial literacy and risk management services on participation in dairy farming in Kiambu County, Kenya. Guided by the Financial Intermediation Theory and Social Capital Theory and anchored in a positivist research philosophy, the study employed a structured questionnaire to collect primary data from 397 respondents. Data analysis involved both descriptive and inferential statistical techniques. Statistical analyses were conducted using the Statistical Package for Social Sciences (SPSS) Version 28.0. The findings revealed that financial accessibility, financial literacy and risk management services had positive and statistically significant effects on dairy farming participation. Financial accessibility was the strongest predictor (Model 1: β = 0.436, p < 0.05; Model 2: β = 0.421, p < 0.05), followed by financial literacy (β = 0.320; β = 0.307) and risk management services (β = 0.295; β = 0.281). The regression model explained 47.7% of the variation in dairy farming participation (R² = 0.477), increasing to 53.9% (R² = 0.539) after controlling for herd size, household size, income level and education level. The study concludes that improved access to financial products, enhanced financial literacy and effective risk management mechanisms significantly increase participation in dairy farming. The study recommends the development of farmer-friendly credit products, integration of financial literacy into extension services and promotion of affordable livestock insurance schemes. Policymakers should strengthen agricultural financial inclusion frameworks, implement credit guarantee schemes and support risk management products to enhance resilience in the dairy sector. The study was limited to Kiambu County and relied on self-reported questionnaire data, which may limit the generalization of findings to other regions. Future studies should examine additional determinants of participation like market access, technological adoption, land tenure systems and regulatory frameworks across different counties to provide a more comprehensive understanding of dairy sector participation.

Keywords: Financial accessibility, financial literacy, risk management services, dairy farming participation, agricultural finance, Kiambu County.