Estimating farmers patronage level of informal credit in Imo State: Implication for efficient formal and informal financial linkage and rural development

Abstract

Low agricultural productivity in Imo State is blamed on poor grassroot financial development. Farmers are caught between maginalization, clumsy, costly and grossly inefficient credit delivery system. An efficient informal credit patronage that engenders informal-formal credit linkage system in Imo State was investigated. Data were collected from 59 arable crop farmers and 15 Informal Financial Agencies (IFAs) in Imo State and analysed using both descriptive ststistics and econometric tools such as frequency/means and Ordinary Least Square regression analysis (OLS) respectively. The result showed that 93.2% of the farmers must have accessed credit from town union/age grade while 55.5 and 33.9% were with Esusu and cooperatives respectively. The mean informal credit patronage ratio of 0.712, ranging from 0.64 (town unions) to 0.97 (esusu groups) was recorded. Average loan of N12,756.61 (town unions) to N12,959.79 (esusu) was obtained. Though there were disbursement with more members in the town unions yet the level of credit patronage was highest (97.0%) with esusu group of farmers. Increase in education, farming experience, household size and social capital each has a significant and positive effect on informal credit patronage while interest rate reduces it. It is recommended that the formal credit sectors should cash on this high informal credit patronage to market loan facilities to informal credit agencies at a lower cost for an informal-formal credit linkage. Key words: Patronage, coperative, esusu, town union, formal and informal linkage and credit delivery.