Appraisal Of Obtaining Agricultural Credits / Loans

Project and Seminar Material for Agricultural Engineering AE

Appraisal Of Obtaining Agricultural Credits / Loans


The ever determining food production in Nigeria has prompted development or administration (military and civilian) both present and past to formulate programmed to ameliorate or arrest this situation. One of such programmed is the agricultural credit facilities scheme, which is being implemented through commercial banks. Sequel to this the researcher examined the problems of obtaining loan for financing agricultural production in Edo State

Chapter One


1.1 Background to the Study

Farmer need productive resources and these resources are acquired with owned or borrowed fund. Agriculture is very important to the economic of most developing countries of the world and because of this, a supply of adequate farmer finance is essential for natural well bring.

Since agriculture is the backbone of the Nigeria economy providing employment to about 70% of its population yet this important sector has suffered healect since the oil boom days. Agriculture has totally declined since the early 1970s Nigeria export crops such as groundnut, palm oil and external have evaluate disappeared and the country is a net importer of food crops. Agriculture recorded growth rate in 1975 at about 2.6% while the population grew at about 70% compared to 57-7% in 1993 economic growth summit (1995) the small scale farmers according to the national agricultural policy document for Nigeria (N.A.P.O.N) constitute over 90% of the food and fiber requirement of Nigeria on the other hand large scale farmers produce has than 1% of farm output in Nigeria but they tend to have greater access to farmer inputs including farm credit or loan.

1.2 Statement of the Problem

This study is to investigate the analysis of the problem associated with obtaining credit for financing agricultural production in Edo state. It would be seen that many problems arise the most for mixable problem encounter by the farmers in the area.

  1. The inability of the farmers to meet the collateral security acquired by the commercial bank is a major problem hindering agricultural sectors. This is as a result where farmers have nothing to deposit in the process of obtaining credit for agriculture.
  2. High interest rate is another factor that discourage farmers from obtaining credit in most commercial banks, payment of interest involve when fund is borrowed.
  3. The low educational background of the farmers also constitutes hindrance in obtaining agricultural credit.
  4. Credit facilities are not easily accessible to small scale farmers.
  5. The bureaveratie native involved in the process of obtaining credit ot loans for agricultural purpose have not being encourage on the part of the farmers. It is on the note that the researcher intends to identify some of the hindering factors in order to proffer solution.

1.3 Purpose of the Study

The main aim of the this study is to find the major problems of obtaining credit or loan for financing agricultural production in Nigeria with particular reference to Edo state.

The objectives of the study are:

  1. To identify the problem militating against adequate financing of agriculture.
  2. To enumerate and analyze the agricultural credit granted to farmers in recent years.
  3. To know how much the commercial banks have help in financing agriculture.
  4. To look how agriculture has developed especially in Edo state.
  5. To create awareness of the problem posed by agricultural financing inadequacies.
  6. To investigate how these problems can be tackled.

1.4 Significance of the Study

  1. This research study will be important to those future researchers in economic and agricultural science who would like to use it as a reference material or for further investigation.
  2. This study is to create awareness to farmers in Edo state, the reasons of low agricultural production and also to bring to the notice of the general public loans for financing agricultural production in the locality.
  3. It will form a good basis to the government for the formulation of policies.
  4. To serve as encouragement to those farmers in the area of study.

1.5 Research Questions

Some question to be tackled in the course of this study has been rise as follows.

  1. Is collateral security a problem of obtaining credit from commercial banks?
  2. Does high interest rate increase the incidence of bad debt?
  3. Does educational background hinder the potentials of obtaining credit?
  4. Is a credit facility accessible for small scale farmers?
  5. Does bureaulrate process pose a lot of problem or obtaining loans to farmers?

1.6 Scope of the Study

This study is aimed at providing details knowledge and understanding of the operation, function and to determine the problems of obtaining loans for financing agricultural production in Edo state through the federal government agricultural credit guarantee scheme (F.G.A.C.G.S) found since 1977. With the view of providing useful suggestion to ease the problem of agriculture development in Nigeria; It is directly towards the application of problems obtained for financing agriculture view of this more emphasis will be placed on the success of credit facilities lending procedure as a criteria of measurement. The performance of the commercial banks in this regard will be assessed by using the present farmers areas to the agricultural credit facilities as well as the hindrance which the small scale farmers faces in obtaining loans from financial institution.

1.8 Definition of Terms

Loan or Credit for Agriculture of Agricultural Credits:

Refers to the process of obtaining control over the use of money, goods and services in the present for a promise to repay at a future date.

Agricultural Finance:

This means ways and means by which a farmers obtain the entire necessary fund required in order to carryout agricultural production.


This means the price paid for the use of borrowed money and is usually expressed as a percent on an annual basis.


This means anything offered as a promise of loan repayment to be given to a lender in cast of non-payment.

Chapter Five

5.0 Summary, Conclusion and Recommendation

5.1 Summary

This chapter is merely receiving the words on the previous chapter i.e. chapter four from the information collected most of respondents were both male and female with different observation. It was discovered from the data collected that the loans given to the small scale farmer and very small for them to make significant change in food production under the scheme. The commercial banks responsible for the credit facilities have a problem posed on the small scale farmers by the high interest rate and it collateral security for re-payment of credit. The inability of prospective borrowed (small scale farmers) especially to produce collateral security make the loan out of their reach under the scheme.

This research revealed that the farmer being pleasant (barely produce for subsistence) cannot afford to produce a valuable property as collateral security. It was also discovered that commercial bank braches are not sufficiently located in the areas designed for the study, most especially the small scale farmer that are suppose to use the loans to carried out agricultural purpose.

5.2 Conclusion

Agricultural credit is on the down trend of the small scale farmer. This information was gathered form the research finding; as more and more people are still involved in small scale farming.

To by able to improve agriculture in Edo state in particular and Nigeria in general a suitable channel of loan distribution should be fashioned out so as to benefit the small scale farmers, who constitute about 70% of the employed labour force in Nigeria. However this research is posed on the role the commercial bank have played so far in improving the agricultural field in Edo state through the federal government programmed is well intended but the most programmed of government in Nigeria, lack effective management.

Hence, something still needs to be done to make farmers a more rewarding profession and to encourage farmers and those already in it so as to improve agriculture in Nigeria.

5.3 Recommendation

Since underdeveloped country is characteristic with illiteracy, low per capital income, poor health care delivery, decayed infrastructure facilities e.g. telecommunication, electricity etc. the following are recommended to make agriculture credits facilities scheme in Edo state.

  1. Government should made proper public enlightenment to the scheme to enable the small scale farmers aware of the improvement in agricultural sectors in the state.
  2. Loans should be released in phase or instrumentally so as to reduce the problem of collateral security this could be devised to ensure or guaranteed repayment of loan.
  3. Commercial banks should be encourage to make an expansion in braches in a central place or rather pick a community that is fact developing in an urban status, preferably local government headquarter. So as to make other neighboring communities have easy access to them.
  4. Government should assist the farmers by granting them credit facilities and also help to subsidize come aspect of agriculture such as tractor hiring and cost of fertilizer.
  5. Solution should also be made by the government to help guarantee loans given to the farmers to remove the problem of collateral security.
  6. High interest rate which discourages farmers to apply for the loan should be reduced and loans granted to farmers should be available to them on time.

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