Appraisal Of The Problems Faced By Small Farm Holders In Accessing Loan Facilities

Project and Seminar Material for Agricultural Engineering AE

Appraisal Of The Problems Faced By Small Farm Holders In Accessing Loan Facilities


Abstract


This work is designed to examine the problems faced by small farm holders in accessing loan facilities in Ovia North East Local Government Area of Edo State. The researcher examined the role of commercial banks in financing agriculture in Edo State. Recommend actions were made to resolve the problems faced by small farm holders in accessing loan facilities in Ovia North Local Government Area of Edo State questionnaires were designed in such a way to be able to elicit unbiased response from respondents. The questionnaire designed for this study was divided into two segments. There were questions meant for the entire respondents, while others are meant for the respondent who have obtained loan under the agriculture credit facilities scheme.


Chapter One


Introduction

1.1 Background to the Study

Farmers need productive resources and these resources are acquired with owned or borrowed fund. Agricultural is very important to the economy of must developing countries of the world and because of this, a supply of adequate finance is essential for national well-being. Since agriculture is the back-bone of Nigeria economy providing employment to about 70% of its population yet this important sector has suffered neglect since the oil boom days. Agriculture has totally declined since the early 1970s Nigeria export crops such as groundnut, oil palm and cocoa have suddenly disappeared and the country is 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. The small scale farmers according to the National Agriculture Policy Document of Nigeria (NAPDN) constitute over 90% of the food and fiber requirement of Nigeria on the other hand 1% of farmers out put in Nigeria. But tend to have greater access to farmers inputs including credit or loans.


1.2 Statement of the Problem

This study is to investigate and analyze the problems associated with obtaining credit financing agriculture production in Edo State it would be seen that many problem arise mostly are problems encountered by the farmers in the area.

  1. The inability of the farmers to meet up with the collateral security required. By the commercial bank is a major problem hindering agriculture sector. This is as a result of farmers to deposit the collateral security before obtaining credit for agriculture development.
  2. High interest rate is another factor that discourages 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.
    The bureaucratic process involved in the process of obtaining credit or loans for agricultural purpose have not being encourage on the part of the farmers.
  4. Credit facilities are not easily accessible to small farm holders. It is not that the researcher intends to identify some of the hindering factor in order to proffer solution.

1.3 Purpose of the Study

The main purpose of this study is to find the major problems of obtaining credit of loans for financing agricultural production in Nigeria with particular reference to Edo State. The objectives of the studies are.

  1. To identify the problem militating against adequate financing of agriculture.
  2. To enumerate and analyze the agriculture credit grant to farmers in recent years.
  3. To find out how much the commercial bank have helps in financing agriculture.
  4. To look at how agriculture has developed in Edo State.
  5. To create awareness of the problem posted by agricultural financing inadequacies.
  6. To investigate how these problems can be tackled.

1.4 Significance of the Study

This research study will be important to that future researcher in the economy and agricultural science who would like to use it as reference materials or for further investigation.

The study is to create awareness to farmers in Edo State, the reason of low agricultural production and also to bring to the notice of the general public loans for financing agricultural production in the locality.

It will form a good basis to the government for the formulation of policies. To serve as encouragement to those farmers in the area of study.


1.5 Research Question

Some questions to be tackled in the course of this study have been raised.

  1. Is collateral security a problem of obtaining credit from commercial bank?
  2. Does high interest increase the incidence of bad debts?
  3. Does educational background hinder the potentials of obtaining credit?
  4. Is a credit facility accessible for small farm holders?
  5. Does bureaucratic process pose a lot of problem in obtaining loan to farmers?

1.6 Scope of the Study

The study is aimed at providing detailed 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 (FGACGS) found since 1977 with the view of providing useful suggestion to ease the problem of agriculture development in Nigeria it is directed towards the application of problems obtained for financing agriculture view of this more emphasis will be placed in the success of credit facilities lending procedure as a criteria of measurement.

The performance of the commercial banks in the regard will be assessed by using the present farmer’s areas to the agricultural credit facilities as well as the hindrance which the small farm holders face in obtaining loans from financial institutions.


1.7 Definition of Terms

Credit:

This is the process of obtaining control over the use of money, goods and services with promise to repay at a future data.

Agricultural finance:

This means way and means by which a farmer obtains the entire necessary fund required in order to carryout agricultural production.

Interest:

This means the price paid for the use of borrowed money and is usually expressed as a present on annuals basis.

Collateral:

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


Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was on appraisal of the problem faced by small farm holders in accessing loan facilities. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges appraisal of the problem faced by small farm holders in accessing loan facilities


5.2 Summary

This study was on appraisal of the problem faced by small farm holders in accessing loan facilities. Six objectives and research questions were raised which included: To identify the problem militating against adequate financing of agriculture, to enumerate and analyze the agriculture credit grant to farmers in recent years, to find out how much the commercial bank have helps in financing agriculture, to look at how agriculture has developed in Edo State, to create awareness of the problem posted by agricultural financing inadequacies, to investigate how these problems can be tackled. The total population for the study is 200 staff of the Federal Government Agricultural Credit Guarantee Scheme (FGACGS) in Edo state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made managers, marketers, senior staffs and junior staffs were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

Nigerian agriculture has high potential but actualizing it depends on concerted efforts to address the major challenges confronting the sector which include among others; access to finance by small scale farmers. This problem has been compounded with the bank consolidation exercise that took place in the country in 2005 as banks’ now prefer to lend to large scale businesses. In the past, the agricultural financing policy of the Nigerian government emphasized primary production without paying attention to the marketing of agricultural products. Consequently, the current emphasis by financial institutions on value chain financing has further compounded the problem of access to credit by small holders who account for over 90 per cent of agricultural production in Nigeria and do not have access to lucrative markets, nor adequate processing and storage facilities. More worrisome, is the fact that the current efforts being made by government to develop value chains has been limited to only few crops, cattle and fish farming, whereas Nigerian agriculture is very diverse with over 25 crops possibilities namely, maize, millet, sorghum, rice, wheat, acha, cowpeas, cassava, potatoes, yam, cocoyam, plantain, assorted vegetables, melon, peanut, sesame, soya bean, cotton, oil palm, cocoa, rubber, sugar cane, kolanut, ginger, cashew, pineapple, and palm produce. Similarly, about seven livestock products are produced in the country namely, poultry, goat meat, mutton, beef, pork, milk, and eggs. In the fishery sub-sector, we have the artisanal and coastal brackish water catches, artisanal inland rivers and lakes catches and fish farming


5.4 Recommendation

In order to improve farmer’s access to credit, modern approaches to agribusiness need to be embraced hence the need to develop more agricultural value chains to cover the array of crops, livestock, fishery and forestry possibilities in Nigeria. In recent times financial institutions are more interested in financing various actors along the value chain. Hence, the small scale farmers need to be positioned to benefit from the new financing initiatives by the Nigerian government. Emphasis is more on cash flow rather than collateral, hence, the farmers have to be financially literate. The need for adequate infrastructure to drive agricultural growth cannot be over emphasised. Adequate rural road network for quick evacuation of inputs and output, power for processing and storage including cold chain to increase value addition and improve shelf life and irrigation facilities to assure year round production and income, are prerequisites. The small scale farmers must be organized and carried along for sustainable agricultural transformation in Nigeria.


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