Abstract
This study examines the factors that influence farmers access to formal banking credit in the rural areas of Nigeria. The data used was collected from rural areas of Katsina State. This study used probit modelling approach to analyse the factors that influence farmers’ accessibility to formal credit. This study found that the level of income, collateral, educational attainment and marital status have significant positive influence on farmers’ access to formal credit, while age and sex have insignificant positive influence on the farmers’ access to credit. On the other hand, interest rate and transaction cost have significant negative influence on the farmers’ access to formal credit. Thus, this paper concluded that with the prevailing banking arrangement in Nigeria, rural farmers have little or no access to credit from conventional banks. Therefore, the study recommended the use of both group lending arrangement and character lending, so that farmers in the rural areas could be reached with formal credit. Key words: Rural farmers’ access to credit, rural finance, Agricultural financing determinants.
Highlights
In Nigeria several programmes were implemented to support agricultural sector; such as Rural Banking, Agricultural Credit Guarantee Scheme (ACGSF), aimed at enhancing availability of credit to rural populace especially farmers at affordable cost
Analyzing access to credit based on gender of the rural farmers, the data in the above table indicated that 5% of male farmers have access to formal credit and overwhelming majority (95%) of them have no access to formal credit
The data revealed that only 1% of women have access to formal credit and 99% of them have no access to institutional credit
Summary
In Nigeria several programmes were implemented to support agricultural sector; such as Rural Banking, Agricultural Credit Guarantee Scheme (ACGSF), aimed at enhancing availability of credit to rural populace especially farmers at affordable cost. Some of the problems identified as responsible for poor performance in the development of Africa’s rural financial markets include excessive controls, ineffective supervision and dearth of qualified manpower (World Bank, 1999). Farming is virtually subsistence in nature in rural Nigeria, perhaps, commercial agriculture was largely absent in the areas, this is partly because most people dwelling in rural areas are poor, characterized by low income, large family size, lack of adequate formal education, low savings and investment, lack of access to credit facilities and use of crude farm implements. Poor economic base, untold hardship, living from hand to mouth, joblessness, high death rate, etc have characterised the life in rural areas (Olayide et al, 1980)
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