Determinants of Demand for Microcredit among Grain Traders in Southwestern States, Nigeria

Abstract

This paper examines critically the key factors influencing demand for microcredit among grain traders in Southwest states, Nigeria. Multistage sampling technique was employed for the study. Two states were randomly selected from the six states in South-western Nigeria. This was followed by random selection of two Local Government Areas (LGAs) from these states. Thereafter, a random selection of rural and urban markets in each of the selected LGAs based on Probability Proportionate to Size (PPS) was done. In all, 500 grain traders were sampled using PPS, with 492 traders having detailed information used for the analysis. Data were collected on grain traders' social-economic characteristics, social capital and microcredit variables using structured questionnaire. Data were analyzed using descriptive statistics and multinomial logit model. The results revealed that N67, 480.13 was granted as loan representing about 46.0% of the total credit needs of the traders while a trader had to wait for 2 weeks and a day before getting the credit. The result further showed that social capital variables (trust index, decision making index, labour contribution, meeting attendance index and heterogeneity index) and credit variables (interest rate charged, credit distance and payback period) significantly explained traders demand for credit. The study suggests that social network of the grain traders needs to be improved on for them to have better access credit to enhance their income.