Bank lending, information asymmetry, credit accessibility and performance of farmers: the case of Tororo District.

Abstract

The study was guided by the following objectives; to examine the relationship between bank lending and credit accessibility, to examine the relationship between information asymmetry and credit accessibility and to establish the relationship between credit accessibility and performance of farmers.

The study was a cross sectional survey and random sampling design was used to select a sample of 108 registered farmers with Tororo District Farmers Association (TODIFA). The data was collected using a set of self administered questionnaires to farmers. The data was analyzed using a statistical Package for Social Scientists (SPSS 11.0) software. Factor analysis was used to identify items that measured the variable most; correlation tests were run to establish the relationship between the study variables and regression analysis to establish the predictability power of the independent variables on the dependent variable.

Results show that there was a significant positive relationship between bank lending and credit accessibility (r= .38**, p<0.01), a significant positive relationship between information asymmetry and credit accessibility (r= .60**, p<0.01, and a significant positive relationship between credit accessibility and the performance of farmers (r= .73**, p<0.01). It is concluded from the study that proper management of bank lending, reducing information asymmetry between farmers and banks increased credit accessibility improves the performance of farmers. It is recommended that banks provide more information, adopt special lending arrangements to provide more credit to farmers, and train farmers in financial management. Among the limitations, the study used a cross- sectional research design which is usually a short- term study and no detailed reviews were undertaken thus the conclusions of this study might have been affected.