An Assessment of Credit Accessibility of Rural Farmers in Benue State: A case study of Bank of Agriculture (BOA)

Project Abstract

<p>&nbsp;                      <b>ABSTRACT&nbsp;</b></p><p>The study assessed credit accessibility of rural farmers in Benue State using Bank of Agriculture (BOA) as a case study. A sample size of 724 respondents was selected through a proportionate random sampling technique. The sample is made up of 362 beneficiaries and non-beneficiaries each. The study used both descriptive and legit regression. Findings from the study showed that the rural farmers (that is, even beneficiaries) have moderate level of accessibility to the BOA loan with high level of inadequacy in terms of the volume of the loan granted to the farmers, while most of the non-beneficiaries have informal financial institutions as their main source of income. The study also showed that gender, age, marital status, household size, main occupation of the respondents, the status of off-farm activity, membership of farmers’ group, years of farming experience, crop yield of farmers, land area cultivated, years of education and lending interest rate are the socio-economic factors that have significant influence on the farmers’ access to BOA loan in the study area. The study therefore recommends that government should establish more formal credit institutions in the rural areas, generally; and revive the moribund branches of BOA in the state, create more awareness about the existence of formal agricultural credits for agricultural production among the farmers, and enlightenment campaign on how to access these credit facilities especially in the rural areas and ensure enough disbursement of funds through BOA to enhance the level of credit facilities. Keywords Accessibility, Bank of Agriculture (BOA) and Credit <br></p>

Project Overview

<p> INTRODUCTION Credit for the farmers, especially in agriculture, is assuming increasing importance in many parts of the world as a deliberate response to the needs of numerous entrepreneurs with limited capital base (IFAD, 2001). In Nigeria, the government emphasizes the transformation of smallholder agriculture from subsistence orientation to market orientation and thus requires the availability of adequate capital. Credit or loanable fund (capital) is regarded as more than just another resource such as land, labor and equipment-because it determines access to all other resources on which farmers depend. The reasoning is that farmers’ adoption of new technologies necessarily requires the use of some improved inputs, which must be purchased. <br></p><p> This is because, agricultural development remains very vital to the growth and development of every economy. Therefore, the place of agriculture in an agrarian society cannot be overemphasized given its importance in the life of human beings. It is expected to ensure adequate supply of food to the people, among other roles. Though the world agricultural output has grown by 2.4 percent per annum over the past two decades, it has remained insignificant because more than 780 million people are chronically undernourished (Organization for Economic Cooperation and Development/Food and Agriculture Organization-OECD/FAO, 2012). <br></p><p> The importance of credit to agricultural development cannot be over emphasized. It enables farmers to advantageously use inputs and factors of production, by granting farmers more access to resources through the removal of financial constraints. The traditional argument for the provision of agricultural credit is that additional capital can be temporarily used to enhance the level of household’s productive and physical capital (Eswaran, &amp; Kotwal, 1990). The provision of credit will reduce the costs of capital intensive technology and assets relative to family labour. Thus, instead of growing low yielding local crops, for example, access to credit may allow an increased use of improved seeds and fertilizers with best agricultural practices thereby leading to higher crop output per unit of labour and land (Feder, Just, &amp; Zilberman 1985). This may in turn encourage the adoption of labour-saving technologies, such as animal traction in crop production (Zeller, Schrieder &amp; Heidhues, 1997). Carter (1989) also argued that credit could lead to efficient resource allocation, increase farmers’ technical efficiency and, by implication, increase farmers’ profitability. Qureshi et al., (1996) also observed that an increase in credit to agriculture will lead to increased food production and farmers’ income because as the demand for credit increases, farmers output also increases, resulting in improvement in their wellbeing. According to Mudi (2007), it is regarded as a major factor in agricultural development, and lack of it is usually given as an explanation for many of the problems facing the sector in the developing nations. It also enhances productivity and promotes standard of living by breaking vicious cycle of poverty of small scale and/or rural farmers In Nigeria, credit has long been identified as a major input in the development of the agricultural sector (Balogun, 1990). It is a major factor necessary for technological transfer in traditional agriculture (Oyatoye, 1981). According to Atagher and Atagher (2014), apart from physical infrastructure, agricultural credit and availability of cooking fuel are other important factors affecting productivity. Studies indicate that many farmers are poor and trapped in a vicious cycle of poverty because they cultivate small areas of land from which they produce little output, and hence sell only a very small amount, which cannot help in expanding their farms, and acquiring new technologies so the cycle continues. To break out of the vicious cycle of poverty, credit is essential since it determines access to most of the resources the farmers depend on (Adegeye and Dittoh, 1985). It is generally agreed among researchers and policymakers that lack of access to adequate credit can have significant negative consequences for various aggregate and household level outcomes, including technology adoption, agricultural productivity, food security, nutrition, health, and overall household welfare (Diagne &amp; Zeller, 2001). Availability and accessibility to credit by farmers can alleviate capital constraints on agricultural households. <br></p><p> In view of the above, the Nigerian governments have made efforts to address the problem of lack of access to credit to the rural poor (Global Agricultural Information Network-GAIN Report, 2011). In recognition of the vital role of small scale farmers in wealth creation, the government of Nigeria has experimented with various financing schemes. These are largely subsidized, targeted credit programmes to promote agricultural production and improve the lives of the rural farmers. In the light of improving access and the use of these credits to farmers that will enable them use modern farm inputs that would lead to increased output of higher quality, increased income and improved standard of living, the Nigerian government took several steps over the years in addressing the challenge. These government financial policies were grouped into five categories viz: credit guidelines by the CBN, concessional interest rates, rural banking scheme, agricultural credit guarantee scheme and specialized financial institutions. Policy packages and programmes such as the World Bank-assisted Agricultural Development Project (ADP), National FADAMA Development Programme, Family Economic Advancement Programme (FEAP), National Poverty Eradication Programme (NAPEP), Refinancing and Rediscounting Facility (RRF), Agricultural Credit Support Scheme (ACSS) and Large Scale Agricultural Credit Scheme (LASACS) were also established. All these did not make any significant improvement in solving the problem of credit accessibility in Nigeria and Benue state in particular. Following the failure of these institutions, schemes and programmes, the Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB), now called Bank of Agriculture (BOA) was formed from the merger of Nigerian Agricultural and Co-operative Bank (NACB), the People’s Bank of Nigeria (PBN) and the Family Economic Advancement Programme (FEAP). <br></p><p> It is therefore necessarily important, to assess the level of accessibility of BOA credit by rural farmers in Benue State and the challenging in accessing these credit facilities. <br></p>