Determinants of Transaction Costs for Borrowers among Farmers in Ikwuano Local Government Area, Abia State, Nigeria

Abstract

The study analyzed determinants of transaction costs for borrowers among farmers in Ikwuano Local Government Area of Abia State, Nigeria. The specific objectives were to; examine the socio-economic characteristics of the respondents in the study area, evaluate transaction costs incurred by borrowers in the study area, estimate and analyze factors that affect transaction costs and identify the constraints in accessing credit. Multi-stage randomized sampling technique was used to elicit data from 60 borrowers in the study area. Descriptive statistics were used to evaluate transaction costs and socio-economic characteristics of the respondents while multiple regression analysis was used to measure the determinants of transaction costs. The study showed that distance to the credit institution, age of the farmer, interest rate, loan size and membership of cooperatives were positive and significantly related to transaction costs. Assets of the farmer and information services were negative and significantly related to transaction costs. Level of education of the farmer, savings and gender were positive but not significant to transaction costs. Lack of collateral and high interest rates were the most important constraints of borrowers in the study area. Given that credit is an important policy instrument to facilitate use of modern technologies in rural areas such as the study area, interest rate should be drastically reduced with creation of good infrastructures in view for use of the loans by these farmers who produce the bulk of food consumed by the generality of the people.