Influence of Farm Characteristics on Financial Portfolio Diversification among Commercial Sugarcane Farmers in Bungoma and Kakamega Counties, Kenya

Abstract

The main purpose of this study was to analyse the relationship between farm characteristics and financial portfolio diversification among sugarcane farmers in Bungoma and Kakamega Counties in Kenya. Descriptive correlation was used to describe and establish the relationships among the study variables. The target population for this study comprised of all sugarcane farmers around Kakamega and Bungoma Counties. Both primary and secondary data was used in this study and the positivistic approach to research guided data analysis will be used for the study. The study variables were measured using both the ordinal scale and summated scale (likert-type scale).The questionnaire was pre-tested on pilot respondents who were not be part of the study respondents but knowledgeable in the study aspects in order to ensure their validity and relevance. Cronbach’s alpha coefficient was used to measure the reliability of the scale. The relationship between return on investment of farm characteristics which was the dependent variable of the study and portfolio diversification was assessed using Pearson product moment correlation. The study found out that there was a positive correlation between contracting farmers secures farm funding and financial portfolio diversification which was statistically significant (r =.468, p<0.05). The regression results revealed that farm characteristics had overall significant positive relationship with the financial portfolio diversification among commercial sugarcane farmers in Kenya (β = 0.204, p-value = 0.012). The hypothesis criteria was that the null hypothesis H₀₄ should be rejected if β ≠ 0 and p-value ≤ α otherwise fail to reject H₀₄ if the p-value > α. From the above regression results, β ≠ 0 and p-value < 0.05, hence the study therefore rejected the null hypothesis since β ≠ 0 and p-value ≤ α and concludes that farm characteristics affected financial portfolio diversification among commercial sugarcane farmers in Kenya.