Financial Management Practices and Performance of Smallholder Farmers’ Tea Companies in the West Tea Block, Kenya
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Date
2024-10
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Publisher
Kenyatta University
Abstract
Smallholder tea farming in Kenya is a critical subsector since it provides a source of livelihood to
over 750,000 farmers directly and indirectly to about 6.5 million Kenyans which represents 13%
of Kenya’s population. Declining tea earnings by smallholder tea farmers threatens the
sustainability of the tea sub-sector in Kenya. In addition, the decline in earnings by smallholder
tea farmers is more pronounced in the West-Tea-Block as compared to East-Tea-Block. This had
caused a great concern to the government and tea value chain stakeholders who were therefore
seeking to unearth what is bedevilling the sub-sector and policy interventions necessary to reverse
the decline. This study therefore investigated the effect of financial ’ management’’ practices’’ on the
performance of smallholder farmers’ tea factory companies in the West Tea Block, Kenya.
Specifically, the study investigated the effect of; financial planning, investment appraisal, financial
reporting and funding decisions on performance of smallholder farmers’ tea factory companies in
the West Tea Block Kenya. In ‘addition,’ the ‘study also determined the moderating’ effect of
corporate governance on the relationship’ between’ financial management’ practices’ and
performance of smallholder farmers’ tea factory companies in the West Tea Block, Kenya. The
theories underpinning the study were the Theory of Budgeting, Real Options Theory,
Performance-Based-Budgeting-Model, Net Income Theory and Agency’ Theory. This study
adopted the positivist research philosophy and explanatory research design. A census was
conducted on all the 34 smallholder farmers’ tea factory companies in the West Tea Block Kenya.
Data was used and collected through a semi-structured questionnaire. Content, criterion, and
construct related validity were confirmed accordingly. The study had a response rate of eighty five per cent. Descriptive statistics were applied to assess variables characteristics including
standard deviation and aggregate mean scores. The multiple regression model was employed to
analyze the effect financial management’ practices on performance. Content analysis was used to
analyse qualitative data. The findings were that financial planning, investment appraisal, financial
reporting and funding decisions had a significantly positive effect on ‘performance of smallholder
farmers’ tea factory companies’ in the West’ Tea’ Block, Kenya. Additionally, the ‘study ‘revealed
that corporate governance had a significant’ moderating’ effect on the relationship’ between’
financial’’ management’’ practices’’ and performance’ of smallholder farmers’ tea factory companies’
in the West’ Tea’ Block, Kenya. The study concludes that adoption and consistent application of
good financial management’ practices enhances the performance of smallholder tea factory
companies’ in the’ West Tea Block, Kenya. The study recommends that the management and boards
of tea factory companies should ensure that clear policies on budgeting and budgetary control,
investment appraisal, funding decisions and financial reporting are developed and implemented
Description
A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Science (Finance) of Kenyatta University October, 2024
Supervisors;
1.Lucy Wamugo
2.Lucy Ngugi