Analysis of Credit Facilities to Small-Scale Farmers. (A Study of Small-scale Farmers in Bende Local Government Area of Abia State)

Analysis of Credit Facilities to Small-Scale Farmers. (A Study of Small-scale Farmers in Bende Local Government Area of Abia State)

Chapter One

OBJECTIVES OF THE STUDY

The specific objectives of the analysis of credit facilities to small-scale farmers are:

To analyze the impact of credit facilities on the operation of small-scale farmers in
To identify and analyze the socio-economic characteristics that may influence farmer’s decision about whether or not to use
To examine the probability that non-borrowers can borrow given that socio- economic characteristics are increased.

CHAPTER TWO

LITERATURE REVIEW

INTRODUCTION

Agriculture is a major contributor to Nigeria’s GDP and small-scale farmers play a dominant role in this contribution (Rahji and Fakayode 2009), but their productivity and growth are hindered by limited access to credit facilities (Odoemenem and Obinne 2010). Credit institutions can be categorized into three groups:

Formal, such as commercial banks, microfinance banks, the Nigeria Agricultural and co-operative Rural development Bank (NACRDB), and state government-owned credit
Semi-formal, such as non-governmental organizations-micro-finance institutions (NGO-MFIs) and co-operative societies,and
Informal, such as money lenders, and rotating savings and credit associations (ROSCA). Enhancing financial Innovation and Access (EFINA) (2008) notes that 23 percent of the adult population in Nigeria have access to formal financial institutions, 24 percent to informal financial services, while 53 percent are financially

The role of credit facilities to small scale farmers has been identified as a major ingredient to agricultural development in the present economics. The small scale farmers are often considered as having greater opportunities of increasing production and farm income by adopting new technology, this potential can only be realised if farmers can gain access to funds to finance the additional inputs that are invariably required. All too frequently, small scale farmers have insufficient savings to finance the investment in additional inputs. Under the circumstance the obvious solution for farmers is to borrow, unfortunately, the desire is not available. This is largely because institution lenders are reluctant to advance credit to the agricultural sector. This can be attributed to the dependence of agricultural production on Nature and the high co-variance of risk from adverse weather and incidence of disease in any given location.

The failure to realise the potential increase in agricultural production has forced the Nigerian Government to introduce programmes to address the problem of risk and accessibility of credit to small scale farmers.

CONCEPTUAL ISSUES

Agricultural productivity in Nigeria was defined by Olayide (1991) as the rate of index of value of agricultural produce to the value of input employed in production. The essential inputs are land, labour, capital, water and management of all inputs listed above, land holds a unique place in the developing countries where the economics are still in the infant stages. Capital formation is always low since savings is a function of income. He mentioned further that production technique is characterized by small holder’s using manual technology, and inconsistency in the government agricultural policies account for poor production in Nigeria. Agricultural credit facilities for many developing countries of the world, Nigeria inclusive is not enough and the few facilities are not made available to farmers. This has led to the Nigerian Economy. The decline has for a long time been blamed on unavailability to access credit by small scale farmers in rural areas.

If a small scale farmer is to grow to become a medium and eventually a large scale farmer, he must have among other incentives an assured supply of credit either in medium or long-term.

OVERVIEW OF CREDIT SCHEME TO FARMERS INNIGERIA

Agricultural development is a process that involves adoption by farmers (particularly small farmers) of new and better practices (Garba, 1987; Orebiyi, 1999). This is due to the fact that most of the new practices have to be purchased but few farmers have the financial resources to finance it.

Before the introduction of credit schemes to farmers in Nigeria, commercial banks were often skeptical to give credit to farmers. This is because small scale farmers lack acceptable collateral security whereas bankers are interested in collateral securities which are highly liquid and which possess “money value” certainty. It was in recognition of this fact that the federal government at various periods put in place credit policies and established credit institutions and schemes that could facilitate the flow of agricultural credit to farmers (Adegeye and Dittoh, 1985).

CHAPTER THREE

RESEARCH METHODOLOGY

INTRODUCTION

Research methodology refers to the procedure and process of reaching sound, dependable and precise explanations to information acquired in the course of the study. It is achieved through a deliberate and organized collection, examination and interpretation of data. It forms the central part of the study because it concentrates on matter associated with sound and types of data, research population, sampling method of data analysis, data estimation techniques, model specification and significance of variable engaged in analysis.

This study is carried out mainly to analyse the impact of bank credit to small scale farmers in Nigeria.

RESEARCH DESIGN

The research design is the plan that outlines the procedure adopted and engaged in the research study. It discloses what tools the research will use in achieving stated objective, process of data collection, collection and presentation, operational implication and the analysis of data. It provides specifically the method to be used in gathering and analyzing data. The research design indicates how the research objective will be accomplished and how challenges encountered in the research will be tackled.

Small scale farmers most especially in the rural areas have limited education, as a result simple and precise questions which can easily be comprehended will be asked to determine the impact of credit facilities on their farming operation. The research design to be engaged in this study shall be descriptive survey design using structural interview.

THE RESEARCH POPULATION

The research population shall comprise small scale farmers whose major farming activities covers both the production of cash and food crop from whom data will be sourced in order to establish the impact of credit facilities and its significant effect on their farming operations. The number of population used by the researcher is 100.

CHAPTER FOUR

RESULTS AND DISCUSSION OF FINDINGS

INTRODUCTION

In this chapter, the result of the investigation carried out in this study is presented. It consists of three sections, the first section deals with demographic data, the second section deals with the presentation of the selected variables based on descriptive statistics while the third section reveals the research hypothesis generated.

The results are presented in tables and discussion follows:

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

SUMMARY

This study analyzed the impact of credit facility to small scale farmers in Nigeria using Bende Local Government Area of Abia state as a major area of study. The study shows explicitly how credit facilities are crucial in the operation of small scale farmers.

In addition to financial operation incentive awarded to small scale farmers by commercial or agriculturally instituted financial institution acting within the confines of stipulated authority, the government in its own capacity too has succeeded in introducing agricultural schemes to boost agricultural productivity and assist farmers. Agricultural Programmes such as ACGSF, RUFIN, NIRSAL, GESS etc. have been introduced.

Also, this study revealed the credence of credit facilities as essential in the operation of small scale farmers in conformity with well researched journals, articles and texts. Study has shown that most of these agricultural schemes have been poorly articulated and managed, leading to further decline in farming operation of farmers.

CONCLUSION

Credit facilities play a crucial role in the operation of small scale farmers, this ensures that the derived output will be that which sustains the growth and development of the economy. The agricultural development policies will therefore be more ensured, if the investment on research and human development are given a proper attention in form of improved educational standard of the people to be able to design an appropriate research and in return formulate a sustainable policy programme.

Increase in farming operations particularly that of small scale farmers is a related venture of the government, the various financial institutions, private enterprise and group of individuals.

RECOMMENDATIONS

Based on the result of the research hypothesis, the alternative hypothesis (H₁) is accepted while the null hypothesis (H₀) is rejected. This means that credit facilities have significant impact on the operations of small scale farmers in Nigeria.

Therefore, from the findings of this research project, the following recommendations are proposed to improve the operation state of small scale farming in Nigeria:

Small scale farmers need to have feasible and accessible credit his will help them out of capital inadequacy that is militating against their farming operation. To make credit more available to farmers, the monetary and banking policies formulated by the Central Bank of Nigeria must be suitable for agricultural development. The agricultural credit fund of the Bank should be more operational and banks should be encouraged to drop the perception of agricultural credit as a highly risky venture.

Government and Private individuals need to work together in order to improve the quality of labour of small farmers by channelling resources to Research and Development (R & D) as it is done in many advanced countries like China, Israel, and America where a farmer can feed about 108 people. There is need for further research into the determinants of access to or exclusion from financial services in Nigeria, as well as the efficiency of policy instrument such as Agricultural Credit Support Scheme (ACSS) and the National Agricultural Research Project (NARP) in improving farmers’ access to
Assessing the potential ability of traditional institutions to provide credit in the absence of collateral could help improve access to credit by small scale farmers, this is because an interview with the ACGs fund desk of the SME unit of CBN suggested that small-scale farmers low access to credit institutions is due to the requirement for collateral and the perceived high risk and uncertainty of agricultural Source: www.ifpri.org.

Supporting facilitation of the transfer of credit from formal institutions through MFIs to small-scale farmers could help improve access and repayment rates. Developing awareness of agricultural insurance institutions to carry out their mandates will lower the risk fixed by financial institutions in lending to small-size
Subsidies and subventions are highly needed by the local farmers because of persistent rise in the local farm produce price due to frequent increase in the price of factor inputs like fertilizer, chemicals, plants and machinery are so expensive that the local farmers in unable to acquire them for effective
Monetary policy which deals with increase in money supply (Expansionary Monetary policy) and has an inverse relationship with interest rate should be pursued. Lending rates and interest rates should be reduced because high interest rate and the short term nature of loans with fixed repayment periods do not suit annual cropping, and thus constitute a hindrance to credit

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