Determinants of Portfolio Diversification: An Empirical Investigation of Small Farms in Kenya
Portfolio diversification also known as off-farm or non-farm diversification has become a common practice among the entrepreneurial farmers across the world and has enabled many to escape poverty. However, many small-scale farmers in Kenya are still solely relying on agriculture as their main source of livelihood which is very vulnerable because of the risks like drought, pests, and diseases. Many small scale farmers in Kenya are still poor due to limited entrepreneurship. This study attempted to establish the determinants of entrepreneurship proxied by portfolio diversification among the small-scale farmers. A cross-sectional survey research design was employed and a multistage sampling technique was used to identify 15 locations of Kiambu and Murang’a Counties of Kenya from which 388 small farms were picked using line transect sampling technique. Descriptive statistics were used to measure the extent of portfolio diversification among small scale farmers. While Linear Probability Model (LPM), Probit and Logit models were used to estimate the probability of factors influencing portfolio diversification. The study established that portfolio diversification is highly associated with farmers’ income and education level. Furthermore, electricity, running water, farm size, years of schooling, gender, desire for food security, cost of farming, access to loans, existence of business opportunities and desire for social status have significant chance of influencing portfolio diversification. Portfolio diversification is the way to go and for farmers to diversify into non-agricultural activities there is need for government to improve credit terms, infrastructure, and learning facilities.
Keywords - Portfolio Diversification, agriculture, Entrepreneurship, Small-scale Farmers