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1.1       Background to the study

Agriculture remains the bedrock of the Nigerian economy. It is the critical sector, capable of providing solutions to the socio-economic crisis and hunger that constitute the major bane in the country’s economic progress. This is through the provision of food, employment for labour force, income generation and supply of arable and cash crops, woods and timbres, livestock and fisheries (Esobhawan,  et al 2013). Despite its decline in the 1970s, which many policy analysts attributed to the sector’s neglect, following the discovery of petroleum, agriculture still provides employment for 70% of the nation’s population, foreign exchange for the country and raw materials for the industries.

The agricultural sector has a multiplier effect on any nation’s socio-economic and industrial fabric because of its multifunctional nature. The performance of the sector is also important in the country’s food security and poverty alleviation efforts, since majority of the poor are located in the rural areas and depend directly on agriculture and its related economic activities for their means of livelihood (Olukoya, 2003).

Rural areas in Nigeria are characterized by small scale farmers that are poor. Increase in rural poverty is attributed to low agricultural productivity. Rural farmers’ returns on their efforts are constrained by a number of factors, including inadequate capital. Buttressing this, Esobhawan and Alabi (2011) opined that farming production business in Nigeria is characterized by small-scale farm holders with fragmented farm holdings, rudimentary farming system, low capitalization and low yield per hectare. They further added that small farm holders constituted about 80% of the farming population in Nigeria. Obasi and Agu (2000) stated that about 70% of Nigeria’s population are involved in agriculture, while 90% of the total food production are from small farms with 60% of the populace earning their living from these farms (Oluwatayo et al, 2008).

The agricultural sector serves as market for products of the non-farm sector as well as major contributor to the nation’s Gross Domestic Product (GDP) but small-scale farmers play a dominant role in this contribution. However, their productivity and growth are hindered by limited access to credit facilities (Rahji and Fokayode, 2009; Odomenem and Obinne, 2010). Despite its importance, Fakayode, et al (2008), stated that agriculture in Nigeria is still faced with numerous problems such as inadequate funding, non-availability of inputs in the right quantity and quality, underdeveloped marketing system and inadequate infrastructural facilities for production which in turn warrants farmers’ need for credit. Inadequate flow of funds (credit) into agriculture has been identified as the most limiting problem to increasing agricultural production in Nigeria (Okorie, 1998). This has resulted in slow development in the sector with attendant increase in food import (Enoma, 2010; Adetiloye, 2012). Also, Yunus (2000) revealed that micro-credit has proved to be an effective and popular measure in the ongoing struggle against poverty, enabling those without access to lending institutions, to borrow at bank rates to start business. According to him, on the average, developing countries have fewer than 20 bank branches per 100,000 adults, and people deposit money at the rate of one-third of what obtains in developed countries. This lack of formal financial services, along with many other factors, have inhibited farmers and other entrepreneurs, particularly in rural areas, from increasing savings, capital formation and investments, with consequent reduction in household consumption. Financial services could help farmers to accumulate funds to purchase input such as fertilizer which are helpful for increasing the production of food crops such as yam, cassava, rice, maize, cocoyam etc.

According to IITA (2009), the crop cassava, manihot esculenta, a woody shrub of the Euphorbiaceae (spurge) family, a native of South America, is extensively cultivated as an annual crop in tropical and subtropical regions of the world. It stated that cassava is the third largest source of food carbohydrates in the tropics, after rice and maize. Similarly, it has been proved that cassava is a major staple food in the developing world, providing a basic diet for over half a billion people. IITA, in its extensive research work has documented that cassava is also one of the most drought

tolerant crops, capable of growing on marginal soils. It also asserted that Nigeria is the world’s largest producer of cassava, while Thailand is the largest exporting country of dried cassava. In the same analysis, IITA (2009), claimed that more than 228 million tons of cassava was produced worldwide in 2007, of which Africa accounted for 52%. In 2007, Nigeria produced 46 million tons making her the world’s largest producer. According to FAO (2002), Africa’s export is estimated to be only one ton of cassava annually. It also stated that nineteen million hectares of cassava were planted worldwide in 2007, with about 63% in Africa.

Since cassava occupies a unique position as a food security crop to small-scale farmer in Edo State in particular, and Nigeria in general, the production of the crop needs to be encouraged by removing or minimizing all the constraints surrounding its production. Among the myriads of problems affecting the production of the crop; limited access to credit by the farmers has been identified as the most serious problem.

Hence, Nwaru (2004) opined that one important factor responsible for the declining agricultural productivity in Nigeria is the limited access of farmers to credit facilities. He also stated that micro finance has proved to be effective and efficient mechanism in poverty reduction all over the world.

1.2       Statement of the Problem

The provision of credit has increasingly been regarded as an important tool for raising the production of small-scale farmers, (Emereole, 1995). Also, Nwaru (2004) reported that the major input necessary for the sustainable application of superior technology that would transform traditional agricultural production system by resource poor households in a developing economy is credit. One problem that arises

is the extent to which credit can be offered to small-scale farmers at low interest rates, at the right time and amount, and without any pre-condition, to facilitate agricultural production in Edo State. The importance of credits to small-scale farmers cannot be over-emphasized, hence, Eswaran and Kotwal (1990) stated that, availability of credit to households increases farmer’s risk bearing ability so as to enable them move towards optimum production. This consideration made the Federal Government, in the 1970’s to set up the farmers’ Agricultural Credit Guarantee Scheme Fund (ACGSF) to ameliorate the effects of agricultural risks. Yet, the majority of small-scale farmers in Edo State are not considered credit-worthy by many formal financial institutions.   Inadequate flow of funds (credit) into agriculture has been identified as the most limiting problem to increasing agricultural production in Nigeria; this has resulted in slow development in the sector with attendant increase in food import (Okorie, 1998).

Furthermore, to increase productivity, efficient use of credit in addition to its provision is an important factor to be considered. Buttressing this fact, (Nwaru, 2004) stated that credit can by itself grow no crop. It can best be seen as an instrument whose effectiveness depends on how well it is used. The German Foundation for International Development (1988) said that granting credit is not a panacea to poverty as every social group is not automatically helped by just being given a loan.  Therefore, availability of adequate credit to finance agricultural production is essential for meaningful agricultural practice. In recognition of the crucial role of credit in farming, from 1964 till date, different governments in Nigeria had implemented several agricultural credit programmes, they include: Agricultural Credit Guarantee Fund Scheme (ACGSF) in 1977, the Agricultural Credit Scheme (ACS) in 2006, Commercial Agricultural Credit Scheme (CACS) in 2009 and Nigerian Incentive Risk Based Sharing System for Agricultural Lending (NIRSAL) in 2012 (Fakayode, et al 2009).. The Central Bank of Nigeria (CBN) in a bid to promote lending to the agricultural sector has employed several policies ranging from tax waiver on interest earned by Deposit Money Bank (DMBs) on agricultural credit to prescription of these banks’ minimum loan portfolio to the agricultural sector.

In spite of these programmes and policies aimed at channeling credit to farmers, credit problems still persisted amongst farmers (Fakayode et al, 2009). Furthermore, most of the credit programmes have been criticized based on their low recovery rate and inadequate diversified portfolio.

Onwudinjo (2012) identified seasonality and time-lag in agricultural production, high rate of default, lack of collateral, high cost of loan administration, ignorance of some farmers, urban locations of the lending institutions, lukewarm attitude of most lending institutions towards lending to productive sectors as some of the reasons why farmers found it difficult to access funds from formal financial institutions in Nigeria.

This study attempted to answer the following questions:

  • What are the socio-economic characteristics of small scale cassava farmers in the study area?
  • What is the volume of credit accessed by the farmers and what is their repayment capacity?
  • Has access to micro credit increased the profitability of cassava farming?

(d)       What are the variables that determine the profit of the cassava farmers?

(e)      Are resources efficiently utilized by micro credit beneficiaries?

(f)        What are the problems faced by small scale cassava farmers.



1.3       Objectives of the Study       

The overall aim of the study was to analyze the effect of micro-credit on arable crop (cassava) production among small-scale farmers in Edo State. The specific objectives were to:

  1. examine socio-economic characteristics of cassava farmers in the study area,
  2. determine the loan volume accessed and repaid by the farmers,
  3. determine and compare the profitability of cassava production by loan beneficiaries and non-beneficiaries,
  4. analyze the variables that determine profit of cassava production,
  5. examine and compare resource use efficiency of loan beneficiaries and non-beneficiaries,
  6. examine the problems faced by the farmers.


1.4       Hypotheses of the study

The following hypotheses were tested:

Ho1:   There is no significant difference in the socio economic characteristics of the         micro-credit beneficiaries and non-beneficiaries

Ho2:    There is no significant difference in the amount of credit requested and the amount granted

Ho3:    There is no significant difference in the amount granted and amount repaid.

Ho4:    There is no significant difference in the profit earned by beneficiaries and non beneficiaries of micro credit.

Ho5:    The variables employed in cassava production are not  significant determinants of respondents’ profit.

1.5       Justification of the Study

The study is important because it will provide relevant information about micro credit to small scale farmers and policy makers in formulating developmental policies in agriculture. The CBN (2005) had observed that the relevance of such credit would:

make financial service accessible to a large segment of potentially productive farmers who otherwise, would have little or no access to formal financial service,

enhance service delivery of micro finance institutions to agriculture for agricultural production and

harmonize operating standards and provide strategic platform for the evolution of micro finance institutions to adopt best practices.


It will reveal to farmers that micro-credit can be a means of

boosting agricultural productivity and reduces agricultural production risks. It will also help the conventional banks especially the commercial banks to know that small-scale farmers can make effective use of agricultural credit.



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