Credit access and the performance of small scale agrobased enterprises in the niger delta region of nigeria

Project Abstract

<p> The study was designed to analyze credit access and performance of small scale agrobased<br>enterprises in the Niger Delta region of Nigeria. A multi-stage sampling technique<br>was adopted in selecting 264 and 96 agro-based enterprises that accessed informal and<br>formal credit respectively, through the use of structured questionnaire and oral interview.<br>A total of 360 respondents were selected and used for the study. Socio-economic<br>characteristics of the enterprises were described using descriptive statistical tools such as<br>percentages, means and frequencies. The logit model was used to examine enterprise<br>characteristics that had significant influence on informal and formal credit access by<br>small scale agro-based enterprises. The Heckman model was used to examine the factors<br>affecting informal and formal credit amount accessed. The Poisson regression model was<br>employed to examine the factors affecting frequency of informal or formal credit access<br>by the enterprises. Current ratio and return on capital were employed to examine the<br>performance of enterprises that borrowed from informal and formal credit markets in the<br>area. Separate treatment of Informal and Formal Credit served to identify the similarities<br>and differences between the credit source concerning the determinants of credit access,<br>amount of credit accessed, frequency of access, credit default and financial performance<br>of the enterprises. The results showed that 60.13% of small scale agro-based enterprises<br>had access to the informal credit market, whereas only 21.86% had access to formal<br>credit market. Enterprise age (p&lt;0.10) and social capital (p&lt;0.01) had significant and<br>positive influences on informal credit access, while gender (p&lt;0.01) had a negative<br>influence on informal credit access. Formal credit access was positively influenced by<br>enterprise age (p&lt;0.05), enterprise size (p&lt;0.05), collateral (p&lt;0.05) and education<br>(p&lt;0.10).<br>Informal credit amount received was positively influenced by enterprise size<br>(p&lt;0.10), guarantor (p&lt;0.05) and social capital (p&lt;0.01), and negatively influenced by<br>gender (p&lt;0.05) and income of enterprise (0&lt;0.01). Formal credit amount received was<br>positively influenced by age of enterprise (p&lt;0.10), size of enterprise (p&lt;0.05), collateral<br>(p&lt;0.01) and social capital (p&lt;0.05). However, influence on income of enterprise<br>(p&lt;0.01) had a negative effect. Frequency of informal credit access had a significant<br>positive influence on experience in borrowing (p&lt;0.01) and social capital (p&lt;0.01), while<br>it had a significant negative influence on income of enterprise (p&lt;0.01) and non-agrobased<br>income (p&lt;0.01). Frequency of formal credit access was positively influenced by<br>education (p&lt;0.10) and collateral (p&lt;0.01), and negatively influenced by interest amount<br>(p&lt;0.01) and non-agro-based income (p&lt;0.01). Furthermore, income of enterprise<br>(p&lt;0.01) had a significant positive effect on informal credit default, whereas, gross profit<br>margin (p&lt;0.01), interest amount (p&lt;0.05) and shock (p&lt;0.01) had a significant negative<br>effect on informal credit default. Also, formal credit default was negatively influenced by<br>gender (p&lt;0.01), education (p&lt;0.05), gross profit margin (p&lt;0.01) and shock (p&lt;0.05).<br>There was a significant difference between mean return on capital employed by<br>enterprises that borrowed from formal and informal credit institutions, hence their<br>performances varied. It was recommended that Government and development partners<br>in the region should realize these changing realities and designed appropriate credit<br>packagesfor the enterprises in the region. This will go a long way in complementing the<br>amnesty programme of the Federal Government of Nigeria in the region. <br></p>

Project Overview