Abstract
This study examined the determinants of borrowing capacity of small holder farmers in Cross River State, Nigeria. A total of 455 farmers were randomly selected through a stratified random sampling technique. The study data was collected by well-structured questionnaire. Statistical tools such as simple descriptive statistics (table, frequency, percentage and mean) and a multiple regression analysis were used to examine the data. The results indicate that 60% of the farmers source their credit from informal financial sector while the mean borrowing capacity of the farmers was N550,500. The regression’s result demonstrated that the determinants of the farmers borrowing capacity included asset value, debt outstanding, and value of equity in asset, educational index, farm size and family size. The study further revealed that the major problems facing farmers are high interest, lack for collateral, short repayment periods, among others. Therefore, it was recommended that small holder farmers should increase their financial asset and Real estate purchases, while financial services providers should carefully study the determinants favorable for lending to small holder farmers in order to increase agricultural financing.
Highlights
About 7% of the respondent farmers secure their credit from formal financial institutions such as commercial banks, Nigerian Agricultural Cooperative and Rural Development Bank
The study revealed that the mean borrowing capacity of farmers was N550,500 in the study area
The determinants of borrowing capacity have been felt, since it has gone a long way in determining the availability of external source of credit to the farmers
Summary
For agricultural practice to be meaningful, one of the enabling factors is addressed by availability of adequate credit to finance agricultural production. The agricultural lending market in any country is made up of the participating financial institutions and units that can effectively lend resources to facilitate the production of farm produce, crops and livestock [1]. These markets are primarily made up of deposit money banks and other financial institutions, firms and individuals [2]. The market can be broadly segmented to formal, semi-formal and informal financial markets including specialized institutions such as Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB), which are playing prominent role in agricultural financing. The problems of the various credit programmes include the following: inadequate number of beneficiaries, interest rate, uneven distribution of agricultural credit, inadequate monitoring and evaluation, underdeveloped production base, weak agricultural policies, high default rate and uncoordinated credit policies [3,4]
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