Influence of Financial Literacy on Economic Sustainability Among Small-Scale Tea Farmers in Kenya, A Case of Ndima Tea Factory, Nyeri County

Abstract

Financial literacy plays a critical role in empowering individuals to make informed decisions regarding their income, savings, credit, and investments. For small-scale tea farmers in Kenya, financial literacy is particularly relevant due to the seasonal nature of agricultural income and the need for long-term planning. This study was an assessment of financial literacy levels among small-scale tea farmers in Kenya and particularly those served by Ndima Tea Factory in Nyeri County. The specific objective was to evaluate farmers' understanding and application of essential financial concepts such as savings, budgeting, credit usage, and investment to determine their ability to manage tea-related income effectively. The study was guided by Human Capital Theory and Financial Capability Framework and applied descriptive research design since it enables collection of qualitative and quantitative data. The population composed of 19,000 tea growers served by the factory. A sample of 381 was used and purposeful random sampling approach was employed to ensure that participants reflect diverse socio-economic backgrounds while targeting farmers actively engaged with the factory. Data collection involved surveys and structured interviews, capturing both quantitative and qualitative insights. Findings on savings indicated that 60% of farmers save with banks, 30% with SACCOs and Chamas. On budgeting, 41% indicated they budgeted for household and farm inputs while 40% budgeted for loan repayments. On financial literacy, 75% of respondents indicated having serious challenges. The outcomes provide actionable recommendations for the farmers and other stakeholders, including the Kenya Tea Development Agency (KTDA), financial institutions, and NGOs, to develop targeted training programs geared towards improving farmer’s financial literacy. This research contributes to the broader conversation on financial inclusion in agriculture, emphasizing the need for sustainable financial education to empower rural communities and promote long-term economic well-being for tea farmers in Kenya.