Economic Analysis of Environmental Conditional Credit as Incentive for Soil and Water Managemnt in Sasumua Sub-Watershed, Nyandarua County, Kenya
Ngigi, Obadiah Hinga
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This study used action research to assess demand for environmental conditional credit as an incentive for soil and water conservation. Credit amounts were incremental with decreasing interest rates with conditions of soil and water conservation practices. The study focused on 325 smallholder farmers as the treatment group and 60 smallholder farmers as a control group for three years period. Double bounded logit model was used to estimate the farmers‘ demand while Difference in Differences method (DiD) was used to assess the impact of the environmental conditional credit on smallholders. Primary data was analyzed using STATA. Results indicated that there is demand for environmental conditional credit among smallholders. Results showed that age, education level, household income, farmer‘s perception on amount of credit to borrow and collateral were found significant in influencing farmer‘s willingness to borrow environmental conditional likelihood. Environmental conditional credit was also observed to have overall positive short-and-long term impacts on farmer‘s capital assets (natural, financial human, physical, and social). The study also concludes that credit is a strong behavioral changes incentive towards natural resources management and a livelihood improvement when well designed. The study recommends for establishment of conditional revolving community fund directed to natural resources management, provision of tax breaks for financial institutions providing loans, which improve ecosystem-based adaptation and government creating funds for the purposes of environmental lending.