International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (1392-1397), Month: October 2019 - March 2020, Available at: www.researchpublish.com
INFLUENCE OF VALUE CHAIN FINANCE ON FINANCIAL PERFORMANCE OF TEA FACTORY UNDER KENYA TEA DEVELOPMENT AGENCY, AN EMPIRICAL REVIEW 1
Jensen Jamgun Iravonga, 2Dr. Willis Otuya (PhD)
1
PhD Student, Masinde Muliro University of Science and Technology, Kakamega, Kenya
2
Senior Lecturer, Masinde Muliro University of Science and Technology, Kakamega, Kenya
Abstract: The purpose of these study was to investigate influence of agricultural value chain finance on financial performance of Tea Factory under Kenya Tea Development Agency. The aim of a systematic review is to identify all empirical evidence that fits the pre-specified inclusion criteria to answer a particular research question or hypothesis. The study targeted all studies that focused on the influence of agricultural value chain financing on performance both locally and internationally. Empirical studies on agricultural value chain financing from 2000 to 2019 was considered. From the findings, only one of the study failed to indicate significant relationship between agricultural value chain financing and performance whereas other reviewed studies indicated that agricultural value chain financing has significant influence on financial performance. Nonetheless, none of the study focused on tea subsector implying that there is need for an empirical studies to investigate relationship between agricultural financing and financial performance of tea factory under Kenya Tea Development Agency. Keywords: Agricultural Value Chain Finance, Financial Performance, Value chain Finance.
I. INTRODUCTION Agriculture in developing countries, all over the world, is experiencing profound, fast-moving changes. Agriculture is the backbone of the Kenyan economy directly contributing 24% of the GDP valued approximately at KSh342 billion in the year 2009 and another 27% indirectly, valued at KSsh.385 billion (Kenya National Bureau of Statistics, 2013; 2012). In 2008, the sector contributed 21% of real GDP. Dairy farming contributes makes up 3% of this GDP. The resulting processes of structural change entail profound consequences for employment, income generation, risk management, poverty alleviation, and the well-being of rural households in these countries. Despite the fact that Kenya‟s and Africa‟s economic mainstay is Agriculture, financial institutions are not lending to this sector (Kariuki, 2016). The subsistence nature of production, and the corresponding low level of savings, has resulted in inadequate funding for farming operations in Kenya. In addition, high interest rates and transactions costs prevent most smallholder farmers from accessing formal financial services. Although cooperatives and savings and credit groups run by rural communities, organized farmers groups, and some NGOs are providing credit to farmers and rural entrepreneurs, these institutions generally lack sufficient capital to cater even to the needs of their members, and therefore have very limited potential to expand their scope or services in a financially sustainable manner. On the other hand, many MFIs provide loans to clients who rely primarily on agriculture as a livelihood strategy: however, since these loans are rarely tailored to the agricultural sector and are not accompanied by embedded technical services, and since the MFIs are rarely interested in the type or
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