Influence of digital financial inclusion on productivity of smallholder farming households in Mwea, Kirinyaga County, Kenya

Abstract

Economies with high levels of digital financial inclusion is reported in literature to have higher levels of productivity. However, the small-scale farmers in Mwea have been complaining of declining agricultural productivity. The farmers have been encouraged to enroll in digital inclusion platforms in the recent years. This study sought to investigate the influence of digital financial inclusion on productivity of smallholder farming households in Mwea, Kirinyaga County, Kenya. Specifically, the study sought to determine the influence of digital payments on productivity of smallholder farming households; examine the effect of digital lending on productivity of smallholder farming households and estimate the influence of digital insurance on productivity of smallholder farming households in Mwea, Kirinyaga County, Kenya. The philosophy underpinning this study was positivism and this study adopts descriptive correlational research design. This study targeted 7022 smallholder farming households in Mwea constituency of Kirinyaga County. The sample size of households in Mwea was determined using the Yamane sampling formula. Snowballing sampling technique was adopted to select 378 households. Primary data was collected using semi-structured questionnaires administered through assistance of research assistants. Review by experts determined the validity of the data collection instruments. The researcher undertook a pilot test on 38 households in Kirinyaga Central to assure on the reliability of responses through the Cronbach alpha value test. SPSS version 25 was proposed to guide data management and to facilitate synthesis of data through descriptive and ordinal regression analysis. Correlation analysis results indicated that digital payment, digital lending and digital insurance had a significant relationship with agricultural productivity. Regression analysis results also showed that digital payment had a positive effect on agricultural productivity of the selected households. This was shown by the increasing odds for higher outcome due to increased digital payments. The findings also showed that the odds of higher agricultural productivity increased with digital lending indicating that digital lending had a positive effect on agricultural productivity. Further, there were higher odds of higher agricultural productivity when digital insurance was adopted. The study concludes that the digital financial inclusion in Mwea is low reflected in the low uptake of digital financial products. The study also concludes that digital financial inclusion has a positive effect on the productivity of smallholder farming households in Mwea, Kirinyaga County, Kenya. The study recommends that the policy makers come up with policies geared towards increased financial inclusion among the smallholder farmers. The study also recommends that households in Mwea increase the usage of digital payments, lending and insurance for increased agricultural productivity. Future research needs to be done using different measures of digital financial inclusion and productivity. Future research also needs to be done based on other constituencies, and other influencers of productivity.