ABSTRACT
This study examined access to
agro-credit by farmers in Kaduna state. This study employed survey research
methodology which covered the three agricultural zones in the study area. To
achieve the objective of the study, five research questions guided the study
and one hypothesis was formulated. Hypothesis was tested using Chow test model.
The data generated were analyzed using multiple regression and 4-point likert
scale rating. A reliability coefficient of 0.78 was obtained using Cronbach
Alpha to establish internal consistency. It was shown that, majority of the
respondents (40%) were aged between 31 and 40 years, 32.5% where aged between 41
and 50 years and 18.33% were between 21 and 30 years. About 41.20% of the
respondents had no formal education, 34.2% attended primary education, 16.7%
obtained secondary certificate while 7.5% attended tertiary institution. About
48.3% of the respondents had farming experience of 20 years and above, 19.2%
had farming experience of between 10 to 14 years and 17.5% had 15 to 19 years.
Majority of the respondents (41.67%) sourced a total amount of between N100,000
and N400,000 from either formal or informal sources, 25.83% sourced less
than or equal to N100,000. Others, 10.83%, 15% and 6.67% have obtained
credit to the tune of N400,001 – 700,000, N700,000 – N1,000,000
and more than N1,000,000 respectively. Age, marital status, level of
education, interest rate and credit awareness were the major determinants of
(p<0.05) credit sourced by the farmers in the study area. Sixty-five percent
and 52.5% of the farmers obtained their credit from informal sources (personal
savings and rotating savings respectively) while 42.5% of them obtained theirs
from formal sources. Lack of trust to pay back the credit (2.89), inability to
receive the amount applied for (2.93), risk of repaying the credit because of
crop failure (2.84), difficulty before getting the credit (2.63) and problem of
getting guarantors (3.00) were the major problems under informal sources. For
formal sources, time spent on getting the credit (2.58), complicated procedures
(2.71), high interest rate (2.80), inadequate collateral security (3.00),
repayment time is short (2.55), illiteracy (2.98), lack of good information
about agro-credit (2.81) and lack of presence of banks in the rural areas
(2.68) were the major problems encountered by farmers.
CHAPTER ONE
INTRODUCTION
1.1 Background
Information
With an estimated 140 million
inhabitants and a population growth rate of 2.5% annually, Nigeria is the most
populated country in sub-Saharan Africa and the 10th most populated country in
the World (National Population Commission [NPC], 2006). Approximately, 49
percent of the population engages in agriculture as their major occupation. The
agricultural sector is the mainstay of the majority of Nigerian rural poor,
with over 70 percent of the active labour force in rural areas employed in agriculture
and the sector contributing over 23 percent of the GDP in 2006 (World Bank,
2007).
Agricultural credit plays a
critical role in agricultural development (Duong & Izumida, 2002). Farm
credit has for long been identified as a major input in the development of the
agricultural sector in Nigeria. The decline in the contribution of the sector
to the Nigeria economy has been attributed to the lack of a formal national
credit policy and paucity of credit institutions. The provision of credit or
loanable fund (capital) is viewed as more than just another resource such as
labour, land, equipment and raw materials (Rahji, 2010). It determines access
to
all
of the other resources which farmers require (Shephard, 1979).
Agricultural practice requires money for the purchase of various factors of
production including land. There are two main sources of agricultural
financing; formal and informal sources. According to Nchouji (2007), the formal
sources are organized and guided by law with effort on the part of the
government, examples are Bank of Agriculture (BOA), commercial banks,
supervised agricultural credit, cooperative societies and government agencies.
Informal sources include friends, relatives, money leaders, saving societies
and traditional groups. These sources are meant to facilitate and increase
agricultural production. Though farmers may patronize these sources, but the
implication involved is the provision of collaterals and other necessary
requirement before
Agricultural credit access has
particular salience in the context of agricultural and rural development in
Nigeria. Some 70% approximately of the population live in the rural areas with
their main source of livelihood being agriculture. Recent studies showed that
the growth rate of investment in the agricultural sector is less than that of
the other economic sector. Therefore, financing agriculture is one of the most
important factors to develop rural areas in developing countries (Kohansal and
Mansoori, 2009). Credit accessibility is important for improvement of quality
and quantity of farm products, so that it can increase farmer’s income and
reduce rural migration. Credit constraints to farm households thus impose high
cost on the society. This is in terms of rural unemployment, rural poverty, and
distortion of production and liquidation of assets. Governments in both
developed and developing countries attempt to overcome these problems by
subsidizing credit, setting up Agricultural Credit Guarantee Fund Schemes (e.g.
ACGFS in Nigeria, 1977) and specialized Agricultural Credit Bank (e. g NACB,
1973 now BOA, 2010) and stimulating institutional innovations in the financial
system (e.g. People’s Bank, Community Bank, Rural Banking Schemes, etc) (Rahji,
2010).
The Nigerian agricultural
sector is among the most heavily regulated sector of the Nigerian economy. The
special interest of government in the agricultural sector is due to its
relevance in the provision of raw materials for industries and most importantly
the provision of food for the teaming Nigerian population and also serving as a
source of foreign exchange for the economy (Adofu, Abula & Audu, 2010). The
Nigerian agricultural sector is not alone in government intervention in terms
of regulation, Akiri and Adofu (2007), opined that the banking industry owing
to the nature of the activities and functions it performs in the economy, is
also......
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