Nambiro, Dennis Emmanuel2024-08-292024-08-292024-06https://ir-library.ku.ac.ke/handle/123456789/28697A Research Project Submitted in Partial in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Economics (Cooperation and Human Development) the School of Business, Economics and Tourism of Kenyatta University. June, 2024 Supervisor Peter Miringu NjengaAgriculture remains a top contributor to the Kenyan economy, significantly affecting the country's Gross Domestic Product. However, agricultural businesses have historically performed poorly, contributing to high food insecurity. Access to credit is crucial for improving productivity in this sector. Yet, the seasonal nature of agricultural income, due to biological processes of maturity, harvesting, and sale, complicates credit availability. Financial institutions typically offer rigid, fixed repayment schedules aimed at promoting fiscal discipline, reducing transaction costs, and simplifying procedures. These schedules, however, clash with the irregular revenues of agricultural businesses, causing disparities in cash flows and irregular loan repayments. The Agricultural Finance Corporation (AFC) has introduced flexible loan products tailored to match loan repayment schedules with projected cash flows from various agricultural enterprises, addressing the mismatch between cash flows and loan repayment. Despite the potential benefits of flexible loan products, limited evidence exists on their impact on the financial performance of agricultural borrowers. This study aimed to investigate the effect of flexible loan products on the financial performance of borrowers in the agricultural sector, specifically examining their impact on annual sales turnover and the coping mechanism index. Additionally, the study explored other factors affecting the financial performance of agricultural enterprises. A cross-sectional survey methodology was employed, gathering primary data from 198 active borrowers of AFC in the Mt. Kenya region using questionnaires. The questionnaire was pre-tested before the final survey. Descriptive statistics revealed that 159 respondents had received some form of flexible loan, while 31 had not. All respondents had attained some level of education. Among the respondents, only 32 were aged between 18-35, with the rest being older. On average, two-thirds of the respondents had undertaken the financed venture for more than five years. The average coping mechanism index was 0.55.Regression analysis indicated that flexible loan products did not have a significant effect on sales revenue. Instead, education and experience significantly affected sales revenue at a 5% significance level. However, flexible loan products significantly impacted the coping mechanism index at a 5% significance level. The study recommends that AFC and other lenders continue issuing flexible loan products and encourage agricultural borrowers to have additional income sources. There is also a need to develop youth-friendly loan products to increase their participation in agricultural activities. Further studies should investigate the trade-offs between flexible loan products, loan default, and loan repaymentenThesis