Analysis Of Demand For Informal And Formal Credit Among Small Scale Cassava Farmers In Oyo State, Nigeria

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The role of credit as an instrument of agricultural transformation cannot be overemphasized; however, several credit programme have been implemented with reported low performance due to inability of the farmers\' enterprise to pay back both principal and cost of capital. The study therefore, investigated demand for credit from both informal and formal source by small scale cassava farmers; and also examined the interaction between cost of capital for informal and formal credit sources. Primary data were collected from 120 farmers who used both formal and informal credit sources. A descriptive statistical tool and ordinary least square regression model were used to analyze the data collected. The results shows that majority of the farmers used friends and relatives (informal source) and commercial banks (formal source) as their source of credit. The result of ordinary least square regression model revealed that farm size cultivated, annual income from cassava production, possession of collateral, membership of the state cassava production programme, cost of fund from formal sources and cost of fund from informal sources are the significant factors that influenced farmers\' demand for credit. The results further showed that formal sources of credit act as a complement to informal source because of supply-demand gap in credit availability from informal source. Thus, formal credit market reform in the form of favourable interest rate to farmers, needs to be encouraged, if the objective of credit programme to agricultural development, in terms of farmers\' socio-economic and credit factors\' capacity is to be met. Keywords : Informal and formal credit,cassava,farmers Journal of Agriculture, Forestry and the Social Sciences Vol. 4 (2) 2006: pp. 50-59