ABSTRACT
The study empirically analyzed the effects of micro
credit on cassava production in Edo state and compared micro credit
beneficiaries and non-beneficiaries. It focused on the examination of
socio-economic characteristics of the respondents, the volume of loan
requested, amount granted and amount repaid, the profitability of the
enterprise by the two groups of farmers, the determinants of their profit,
examination of resources use efficiency and the constraints affecting the
farmers. Multistage sampling technique was adopted in selecting one hundred and
eleven (111) micro credit beneficiaries and one hundred and seven (107)
non-beneficiaries. Data were collected through the administration of structured
questionnaire for the literate respondents and an interview schedule for the
illiterate respondents. Data were analyzed using descriptive statistics,
budgeting analysis, inferential statistics, using production function analysis,
marginal value productivity analysis and a three (3) point Likert scale for the
constraints rating. The results showed that farming operations were dominated
by the males (91.9%) for beneficiaries and (83.2%) for the non-beneficiaries
and they were literate farmers. Majority of them had no extension services
(80.2% of beneficiaries and 95.3% non-beneficiaries). They cultivated small
size farm holdings ( for the beneficiaries and ( for the non-beneficiaries.
Only two socio- economic characteristics (family size and farm size) had
significant difference (P <0.05). Cooperatives were the major source of
credit (60%) for the beneficiaries. There was great disparity between the
amount requested and the amount granted, the difference was significant (t
=P< 0.05). The business was more profitable for the beneficiaries than the
non-beneficiaries and the difference in the profit was significant
(t=P<0.05). The Cobb-Douglass production function provided the best-fit
equation. Five (5) of the variables were found to be significant determinants
of the beneficiaries’ profit (P<0.05) while four (4) variable were the
significant determinants of the non-beneficiaries’ profit (P <0.05). No
resources were efficiently used in cassava production by the credit beneficiaries
while one resource was efficiently used by the non-beneficiaries. The serious
constraints affecting the beneficiaries were, transportation ( , land scarcity
( , late timing of granting loan ( , smallness of loan granted ( and high cost
of labour ( . For the non-beneficiaries, serious problems were: lack of access
to micro credit ( , transportation ( , land scarcity , and high cost of labour
. In conclusion access to micro-credit could be of immense benefits to cassava
farmer as it could enable them to expand their holdings, reduce cost of
operation, achievement of higher returns and economies of large-scale
production. It recommended for the formation of farmers’ cooperative society
and more favourable access to credit facilities.
CHAPTER ONE
INTRODUCTION
1.1 Background to
the study
Agriculture remains the bedrock of
the Nigerian economy. It is the critical sector, capable of providing solutions
to the socio-economic crisis and hunger that constitute the major bane in the
country’s economic progress. This is through the provision of food, employment
for labour force, income generation and supply of arable and cash crops, woods
and timbres, livestock and fisheries (Esobhawan, et al 2013). Despite its decline in the
1970s, which many policy analysts attributed to the sector’s neglect, following
the discovery of petroleum, agriculture still provides employment for 70% of
the nation’s population, foreign exchange for the country and raw materials for
the industries.
The agricultural sector has a multiplier
effect on any nation’s socio-economic and industrial fabric because of its
multifunctional nature. The performance of the sector is also important in the
country’s food security and poverty alleviation efforts, since majority of the
poor are located in the rural areas and depend directly on agriculture and its
related economic activities for their means of livelihood (Olukoya, 2003).
Rural areas in Nigeria are
characterized by small scale farmers that are poor. Increase in rural poverty
is attributed to low agricultural productivity. Rural farmers’ returns on their
efforts are constrained by a number of factors, including inadequate capital.
Buttressing this, Esobhawan and Alabi (2011) opined that farming production
business in Nigeria is characterized by small-scale farm holders with
fragmented farm holdings, rudimentary farming system, low capitalization and
low yield per hectare. They further added that small farm holders constituted
about 80% of the farming population in Nigeria. Obasi and Agu (2000) stated
that about 70% of Nigeria’s population are involved in agriculture, while 90%
of the total food production are from small farms with 60% of the populace
earning their living from these farms (Oluwatayo et al, 2008).
The agricultural sector serves as
market for products of the non-farm sector as well as major contributor to the
nation’s Gross Domestic Product (GDP) but small-scale farmers play a dominant
role in this contribution. However, their productivity and growth are hindered
by limited access to credit facilities (Rahji and Fokayode, 2009; Odomenem and
Obinne, 2010). Despite its importance, Fakayode, et al (2008), stated that
agriculture in Nigeria is still faced with numerous problems such as inadequate
funding, non-availability of inputs in the right quantity and quality,
underdeveloped marketing system and inadequate infrastructural facilities for
production which in turn warrants farmers’ need for credit. Inadequate flow of
funds (credit) into agriculture has been identified as the most limiting
problem to increasing agricultural production in Nigeria (Okorie, 1998). This
has resulted in slow development in the sector with attendant increase in food
import (Enoma, 2010; Adetiloye, 2012). Also, Yunus (2000) revealed that
micro-credit has proved to be an effective and popular measure in the ongoing
struggle against poverty, enabling those without access to lending
institutions, to borrow at bank rates to start business. According to him, on
the average, developing countries have fewer than 20 bank branches per 100,000
adults, and people deposit money at the rate of one-third of what obtains in
developed countries. This lack of formal financial services, along with many
other factors, have inhibited farmers and other entrepreneurs, particularly in
rural areas, from increasing savings, capital formation and investments, with
consequent reduction in household consumption. Financial services could help
farmers to accumulate funds to purchase input such as fertilizer which are
helpful for increasing the production of food crops such as yam, cassava, rice,
maize, cocoyam etc.
According to IITA (2009), the crop
cassava, manihot esculenta, a woody shrub of the Euphorbiaceae (spurge)
family, a native of South America, is extensively cultivated as an annual crop
in tropical and subtropical regions of the world. It stated that cassava is the
third largest source of food carbohydrates in the tropics, after rice and
maize. Similarly, it has been proved that cassava is a major staple food in the
developing world, providing a basic diet for over half a billion people. IITA,
in its extensive research work has documented that cassava is also one of the
most drought
tolerant crops, capable
of growing on marginal soils. It also asserted that Nigeria is the world’s largest
producer of cassava, while Thailand is the largest exporting country of dried
cassava. In the same analysis, IITA (2009), claimed that more than 228 million
tons of cassava was produced worldwide in 2007, of which Africa accounted for
52%. In 2007, Nigeria produced 46 million tons making her the world’s largest
producer. According to FAO (2002), Africa’s export is estimated to be only one
ton of cassava annually. It also stated that nineteen million hectares of
cassava were planted worldwide in 2007, with about 63% in Africa.
Since cassava occupies a unique
position as a food security crop to small-scale farmer in Edo State in
particular, and Nigeria in general, the production of the crop needs to be
encouraged by removing or minimizing all the constraints surrounding its
production. Among the myriads of problems affecting the production of the crop;
limited access to credit by the farmers has been identified as the most serious
problem.
Hence, Nwaru (2004) opined that one
important factor responsible for the declining agricultural productivity in
Nigeria is the limited access of farmers to credit facilities. He also stated
that micro finance has proved to be effective and efficient mechanism in
poverty reduction all over the world.
1.2 Statement
of the Problem
The provision of credit has
increasingly been regarded as an important tool for raising the production of
small-scale farmers, (Emereole, 1995). Also, Nwaru (2004) reported that the
major input necessary for the sustainable application of superior technology
that would transform traditional agricultural production system by resource
poor households in a developing economy is credit. One problem that arises
is the extent to which credit can be
offered to small-scale farmers at low interest rates, at the right time and
amount, and without any pre-condition, to facilitate agricultural production in
Edo State. The importance of credits to small-scale farmers cannot be
over-emphasized, hence, Eswaran and Kotwal (1990) stated that, availability of
credit to households increases farmer’s risk bearing ability so as to enable
them move towards optimum production. This consideration made the Federal
Government, in the 1970’s to set up the farmers’ Agricultural Credit Guarantee
Scheme Fund (ACGSF) to ameliorate the effects of agricultural risks. Yet, the
majority of small-scale farmers in Edo State are not considered credit-worthy
by many formal financial institutions.
Inadequate flow of funds (credit) into agriculture has been identified
as the most limiting problem to increasing agricultural production in Nigeria;
this has resulted in slow development in the sector with attendant increase in
food import (Okorie, 1998).
Furthermore, to increase productivity, efficient use of credit in
addition to its provision is an important factor to be considered. Buttressing
this fact, (Nwaru, 2004) stated that credit can by itself grow no crop. It can
best be seen as an instrument whose effectiveness depends on how well it is
used. The German Foundation for International Development (1988) said that
granting credit is not a panacea to poverty as every social group is not
automatically helped by just being given a loan. Therefore, availability of adequate credit to
finance agricultural production is essential for meaningful agricultural
practice. In recognition of the crucial role of credit in farming, from 1964
till date, different governments in Nigeria had implemented several
agricultural credit programmes, they include: Agricultural Credit Guarantee
Fund Scheme (ACGSF) in 1977, the Agricultural Credit Scheme (ACS) in 2006,
Commercial Agricultural Credit Scheme (CACS) in 2009 and Nigerian Incentive
Risk Based Sharing System for Agricultural Lending (NIRSAL) in 2012 (Fakayode,
et al 2009).. The Central Bank of Nigeria (CBN) in a bid to promote lending to
the agricultural sector has employed several policies ranging from tax waiver
on interest earned by Deposit Money Bank (DMBs) on agricultural credit to
prescription of these banks’ minimum loan portfolio to the agricultural sector.
In spite of these programmes and
policies aimed at channeling credit to farmers, credit problems still persisted
amongst farmers (Fakayode et al, 2009). Furthermore, most of the credit
programmes have been criticized based on their low recovery rate and inadequate
diversified portfolio.
Onwudinjo (2012) identified
seasonality and time-lag in agricultural production, high rate of default, lack
of collateral, high cost of loan administration, ignorance of some farmers,
urban locations of the lending institutions, lukewarm attitude of most lending
institutions towards lending to productive sectors as some of the reasons why
farmers found it difficult to access funds from formal financial institutions
in Nigeria.
This study attempted to answer the following questions:
(a)
What
are the socio-economic characteristics of small scale cassava farmers in the
study area?
(b)
What
is the volume of credit accessed by the farmers and what is their repayment
capacity?
(c)
Has
access to micro credit increased the profitability of cassava farming?
(d) What are the variables that determine the
profit of the cassava farmers?
(e) Are resources efficiently utilized by micro
credit beneficiaries?
(f) What are the problems faced by small scale
cassava farmers.
1.3 Objectives of
the Study
The overall aim of the study was to
analyze the effect of micro-credit on arable crop (cassava) production among
small-scale farmers in Edo State. The specific objectives were to:
a.
examine
socio-economic characteristics of
cassava farmers in the study area,
b.
determine
the loan volume accessed and repaid by the farmers,
c.
determine
and compare the profitability of cassava production by loan beneficiaries and
non-beneficiaries,
d.
analyze
the variables that determine profit of
cassava production,
e.
examine
and compare resource use efficiency of loan beneficiaries and
non-beneficiaries,
f. examine the problems faced by the
farmers.
1.4
Hypotheses of the study
The following hypotheses were tested:
Ho1: There is no significant difference in the
socio economic characteristics of the micro-credit
beneficiaries and non-beneficiaries
Ho2:
There is no significant difference in
the amount of credit requested and the amount granted
Ho3: There is no significant difference in the
amount granted and amount repaid.
Ho4: There is no significant difference in the
profit earned by beneficiaries and non beneficiaries of micro credit.
Ho5: The variables
employed in cassava production are not
significant determinants of respondents’ profit.
1.5 Justification
of the Study
The study is important because it
will provide relevant information about micro credit to small scale farmers and
policy makers in formulating developmental policies in agriculture. The CBN
(2005) had observed that the relevance of such credit would:
make financial service accessible to
a large segment of potentially productive farmers who otherwise, would have
little or no access to formal financial service,
enhance service delivery of micro
finance institutions to agriculture for agricultural production and
harmonize operating standards and
provide strategic platform for the evolution of micro finance institutions to
adopt best practices.
It will reveal to farmers that micro-credit
can be a means of
boosting agricultural productivity
and reduces agricultural production risks. It will also help the conventional
banks especially the commercial banks to know that small-scale farmers can make
effective use of agricultural credit.
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