Does agricultural credit impact the demand for coffee inputs? A case study of Kenya

Abstract

Smallholder coffee farmers in Kenya face persistent constraints in accessing essential inputs for higher productivity. To mitigate this, the government established the Commodity Fund in 2006 to provide targeted agricultural credit, particularly to coffee growers. However, empirical evidence on its effectiveness remains limited. This study examines the impact of agricultural credit on smallholders’ demand for coffee inputs in Kiambu County between 2016 and 2020. Using survey data from 500 farmers, 250 credit recipients (treatment) and 250 non-recipients (control) matched through propensity score matching, the analysis applies a two-stage least squares framework with robustness checks based on average treatment effects. Results show that access to credit significantly increases input demand, with nitrogen fertilizer purchases rising by 20%, alongside notable increases in phosphorous-potassium fertilizers, certified seedlings, agrochemicals, and hired labour. These findings indicate that agricultural credit enhances farmers’ capacity to invest in productivity-enhancing inputs, thereby supporting sustainable coffee production. Beyond its empirical contribution, the study informs agricultural financing debates in developing economies and underscores the need for policies that strengthen credit schemes to improve farmer livelihoods and sectoral sustainability.